Again we find ourselves on Friday afternoon with the potential for events over the weekend to overtake any intelligence we might glean from the behavior of the markets this week. While we have seen two very bullish days, there are good reasons to be cautious and to not take on too much additional risk:

• While financial stocks and the broader markets appear to be recovering, much of the gains are a result of short covering, particularly in the financials. Bloomberg reports that short interest in financial stocks increased this year to 36 percent of all shares sold short in the S&P 500. The true underlying strength of the rally will not be clear until all the shorts are covered.
• Until the details of the Treasury plan are released, and there is bi-partisan support for it, the market recovery is at risk. Republicans may balk at a $1 trillion bail out and Democrats will not support a plan that rewards Wall Street for its excesses but leaves Main Street struggling and with an added burden on taxpayers. With only a week before Congress adjourns, there is little time to agree on the biggest Government expenditure ever contemplated.
• The bailout will almost certainly depress the dollar further adding to inflationary pressure on imports and may do little to improve the economic fundamentals, so while we may see a short term bounce, the underlying trend may still be downwards.

Nevertheless, this was an outstanding week for breakouts. We counted 93 confirmed breakouts, 67 of which came from our Cup-with-Handle watchlist. By Friday's close these breakouts had made an average gain of 4.7%, easily out stripping the gains in the indexes.

A further improvement was made to the new Personal Watchlist service to allow the breakout price to be displayed when viewing the intersection of PWL stocks and our watchlists.