Stocks rebounded smartly last week as this year’s pattern of choppy, mostly sideways trade continued to assert itself. The dollar posted a nominal rebound while gold surged to a new 4-month high. Crude oil futures approached $50, proving that oil’s $40 price was indeed, as speculated upon by our fearless Fed chief, quite transitory.

The stock market continues to trade within a long-standing downward channel, marked by progressively lower highs and lower lows, but still primarily range-bound. The highs get a little lower, the lows get a little lower, but nothing much seems to happen overall. In fact, prices today are at about the same levels we saw in July, May, March and last December.

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Not so very long ago the markets served as barometers for financial conditions. One could get a read on where the economy was headed based on the stock market which discounted the present and looked ahead to forecast the future. Gold was watched closely as a barometer for inflation. Those were the days when the “powers that be” had slightly more integrity (very slightly) than they do today and believed in “free markets.”

There was also a time when Americans bought homes and looked forward to the day when they’d be paid off, owned “free and clear.” Debt and credit were used judiciously to help make ends meet. Credit cards were used for the sake of convenience.

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Stocks hit the skids last week as all the major indices plunged to new multi-month lows and confirmed major tops. The rally in the Dollar Index gave up once again at the long-term downtrend line and turned sharply lower last Friday while gold surged higher to test the $400 level. And crude oil continued to climb to new lifetime highs.

I should have known something big was coming, judging from the veritable cornucopia of uninspired “you’re wrong wrong wrong” hate mail received last week. In the future I request that hate mailers be more specific in their criticism. Please check off one of the following:

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Stocks made some gains last week as the Dow and S&P 500 reversed from tests of their trading range lows to close higher on the week while the Nasdaq Composite rallied from a new 10-month low set earlier in the week. The dollar rocketed higher and probed the long-term downtrend line which has thus far capped all rallies during the bear market while gold reversed most of its weekly loss to close slightly higher. And the “transitory” (Fed lingo for “don’t worry, be happy!”) upsurge in crude oil prices hit another “transitory” lifetime high last week as futures approached the “transitory” level of nearly $44 per barrel.

More than 80% of S&P 500 companies have now reported second quarter earnings and according to Thomson First Call, profit growth came in at a whopping nearly 30%. If the remaining 20% of companies reporting will do their thing to support the cause, it’ll be the first time in more than 30 years that we’ve seen three quarters in a row of 25% growth or better. On top of that, better than two thirds of companies reporting so far have beaten analysts’ estimates.

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