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Daily Blog -12/29/08- 1:20 p.m.

The stock market is recovering from its lows. Bears have been in control almost all day. Rising tensions between Israel and Palestinians spooked the markets this morning. Anytime there is a flare up in the Mid East crude oil tends to jolt higher. This morning oil rallied more than $4 to over $42 a barrel. The knee-jerk reaction in oil has faded and the commodity is back to $38 a barrel.

The pull back in oil hasn't hit the oil stocks yet as the OIX oil index and OSX oil services index are still holding on to decent gains. Gold is also doing well and gold stocks are out performing gold the commodity. Meanwhile techs and financials seem to be the biggest losers.

Technically the markets are deteriorating. The path of least resistance seems to have changed back toward a downward trend. Stocks are now seeing lower highs and lower lows. The Russell 2000 small cap index (RUT) was a key mover today. The RUT had been the last of the major indices to maintain its bullish pattern of higher lows. That pattern broke down today.

I would be looking to open more bearish positions and ETFs for the major indices are a good place to look.

Here's a chart of the RUT:

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