Sulaman Chaudhry and Andy Cole send: Quickly recapping last week:

• The Dow lost 16%, the Nasdaq fell 13%, and the S&P dropped 16% in what was a history making week on Wall Street.
• Ford (F) and General Motors (GM) shares both fell all-time lows as the S&P placed both of the automakers on watch for credit downgrades. GM’s stock fell to as low as $4.00 before rallying to $4.89 last week and Ford is now trading at $2.00.
• Regional bank National City (NCC) is putting itself up for sale after the sub-prime woes have taken its toll on the institution. National City is down 80% for the year.
• Iceland is on the verge of a financial collapse as the government took control of the nation’s largest bank.
• The oil trade broke down last week as concerns of a global recession remained intact. Oil is now trading at $80 a barrel.
• Nancy Pelosi wants to bring lawmakers back to Capitol Hill, as she seeks a second $150 billion economic relief plan for Americans.
• Treasury Secretary Hank Paulson is actively considering buying troubled shares of troubled banks in an attempt to shore up the financial system. If that doesn’t constitute socialism, then we don’t really know what does.

Again, nothing has changed fundamentally with regards to the economy and technically, things continue to look just terrible. However, we’ve been saying for the last few posts that we are expecting some sort of snap-back rally into the next few days, as we are terribly oversold, and we still believe that to be the case into the coming week. Let’s take a look:

Friday was an interesting day, as we saw heavy volume and wild swings on throughout the indexes. Could 840 be a short-term bottom on the S&P 500? Only time will tell, but the fact remains that the bottoming out process of an index will take months to properly form. So, if we missed this bottom, the odds are that we will likely be able to enter at these levels again sometime in the not too distant future. In our view, though, we could still see some selling into the later stages of this week. Ideally, we’d like to see a test of 800 on the S&P before we get long with any conviction.

The Nasdaq has been by far the most interesting index as of late. We’ve seen some pretty noticeable strength among tech giants such as Apple (AAPL), Google (GOOG), and Research in Motion (RIMM). If we are in the early stages of forming a bottom here, big-cap technology definitely looks appealing. Again, though, you have to trade around this market and put risk-management first.

The Financial ETF (XLF) got crushed last week as the short-selling ban was repealed. However, we saw quite a bounce off of $13 to the current price of $15 on nice volume. If we ever reach that $17 level, the trade short without question. Let’s hope the government doesn’t reinstate that short-selling ban though.

This Gold ETF (GLD) chart has been unbelievably choppy as of late. That $82 level looks to be a nice entry point to the long side. However, there are definitely other charts we’d rather be trading.

Apple has been trading very well given current market conditions. There are a lot of buyers coming in at these levels and if we are reaching something of a bottom here, Apple is priced at a 19x P/E, which is almost unheard of if you have been following this company for the past few years. Furthermore, Apple has almost $20 billion in cash on their balance sheet, a huge plus in these tight credit markets. This is definitely a stock to keep an eye on.

That’s about it from here. We are getting closer to a short-term bottom. If it turns out that Friday was the low for the next few weeks, don’t get too anxious to buy in because bottoms take months to form and often will provide for multiple points of entry. Our focus for this week, though, is 800 on the S&P. We’d really like to see a test of that level before we start calling bottoms anywhere.

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