Jun 30, 2008 (SmarTrend� via COMTEX) ----There's a lot of talk about investors getting spooked, and bailing out just before a rally commences. Don't buy it yet. The DJIA dropped another 100 points on Friday, all the indicators are slithering along in the oversold gutter, and a near-term rally is expected shortly, but it is going to be a hard grind up with the longer-term trends applying continuing crushing downward pressure.

The market indices are struggling mightily to hang on at current levels. All indicators are markedly oversold; a near-term uptrend rotation should be in the offing. However, the intermediate and long-term trends are still headed south, and despite their indicators being oversold, they can drop further. The daily SmarTrend(R) uptrends to downtrends improved a little on Friday, registering 22:174, yet still strongly biased to the downside. The IBDI is deep into its oversold zone, but has been deeper earlier this year. The Trend Ratio has sunk to 33, but in this long-term downtrending market could drop to as low as 20. If those indicators fall lower, the DJIA is in danger of breaking down below 11,000.

Mitigating against that low level being penetrated this week are steeply oversold near-term indicators. All four are in extreme positions from which near-term rallies historically have launched. The issue this time is the crushing weight being applied by the longer and stronger intermediate and long-term trends. Thus, any near-term rally will by necessity mean having to drag those millstones uphill. So the expected near-term rally by the market indices is likely to be weak, short-lived and unlikely to launch a reversal of the current bear market despite the abundant propaganda intended to reassure investors.

The truth is that the recent run-up in oil prices has taken a broad toll across almost the entire economy at a time when financial institutions are still recovering from pervasive lending mistakes that propped up the real estate market beyond rationality. And some credible forecasters think oil prices are yet to peak. Thus, the stock market is doing what it always does, revalue the equity segment of the economy and thereby signal in advance the consensus view of expected outcomes in the broader economy. The trends examined in this report try to measure the time and slope to stock market outcome since it is a leading economic indicator. Currently the trends show that the market still has a strong downward bias, and is likely to continue to have the same for the next quarter, and so the next few upward rotations will be weak rallies in a downtrending market. When that pattern changes the trade-term trend will be the first to show a change. It did not do so Friday and is not likely to do so this week. Although the upcoming near-term rally, which may be good for about 500 DJIA points, may give the impression the longer downtrend siege is over, the prudent long buyer will wait for this to be confirmed.

All the stocks in trend rotations are identified at http://www.mysmartrend.com and are available for review

Despite multiple attempts to rally Friday, the major U.S. equity indices closed with moderate losses as the Dow crossed into bear market territory on renewed financial fear and surging crude prices. The Dow Jones Industrial Average fell more than 20% off its high in October, which is considered the definition of a bear market among investors, but was able to close the week down 496 points, or 4.2% and only 0.1% above this 'bear' level. The Dow's 10.2% June decline is on the cusp of becoming its worst one-month loss since September of '02 and even more disconcerting, its worst June performance since 1930. Meanwhile the S&P 500 lost 40 points last week, or 3% to close at 1278, making it 18.3% from its high in October.

Financials led the market lower Friday, as Moody's reported that it could cut its long-term rating on Morgan Stanley (NYSE:MS), attributing the move to "inconsistent" risk management. Shares of Morgan Stanley (NYSE:MS) closed off 0.3% to $36.71 on the news. In addition, Fitch Ratings warned that losses for credit-card companies like Discover Financial (NYSE:DFS), American Express (NYSE:AXP), JP Morgan Chase (NYSE:JPM) and Citigroup (NYSE:C) will most likely continue. Financial sector 'finger-pointing' continued when Lehman Brothers (NYSE:LEH) issued a report on Merrill Lynch (NYSE:MER), increasing its estimate on the firm's second-quarter loss due to higher-than-expected losses incurred by sub-prime related writedowns. Lehman (NYSE:LEH) analyst Roger Freeman increased his estimated loss to $2.78 per share, a considerable increase from his previously estimated 64 cent loss. Shares of Merrill (NYSE:MER) closed off 1.1% to $32.70 on the news. In other Lehman (NYSE:LEH) news, two of the firm's top executives, CEO Richard Fuld and operating chief Bart McDade, will be foregoing their 2008 bonuses in the wake of the company's $2.8 billion second quarter loss. Shares of Lehman (NYSE:LEH) closed down 1.6% to $22.25. Shares of AIG (NYSE:AIG) closed off 1.2% to $27.75 on Bloomberg reports that said the insurer plans to take losses for twelve insurance units following losses of $13 billion in writedowns on their securities-lending accounts stemming from the subprime meltdown over the past year.

In earnings news, KB Homes (NYSE:KBH) reported a widened loss for its second quarter, announcing a net loss of $255.9 million, or $3.30 a share, compared to a loss of $148.7 million, or $1.93 a share year-over-year. Analysts expected the California-based homebuilder to report a net loss of $1 a share. Shares of the company closed off 2.3% to $17.72 on the news. Palm (NASDAQ:PALM) closed 8.3% lower to $6.00 a share after the Treo maker reported a fourth-quarter loss, of $43.4 million, or 40 cents per share (22 cents ex-items), compared to a profit of $15.4 million, or 15 cents per share the same period a year earlier. The results missed estimates of 18 cents. Shares of Anheuser-Busch (NYSE:BUD) closed up 1.5% to $62.26 after the St. Louis-based brewer rejected InBev's $46 billion takeover offer, saying that the offer undervalued the company and leaving the door open to other suitors or a higher offer.

In economic news, U.S. consumer spending rose 0.8% in May according to a report from the Commerce Department, making it the biggest rise since November. Incomes rose 1.9%, which was the most since September of 2005. The Commerce Department attributed the increase in spending to the stimulus checks, but cautioned that tighter credit and jobs losses will slow spending once the rebate checks run out. According to a separate report, the University of Michigan's consumer confidence survey came in at 56.4, slightly below economists' forecasts.

Light sweet crude for August delivery hit new intraday all-time high of $142.60 Friday, settling at $140.21 a barrel on the weak dollar and supply concerns and is currently trading above the $143 a barrel level in electronic trading.

In corporate news, France Telecom (NYSE:FTE), which is Europe's third-largest telephone operator, withdrew its $40.8 billion offer for TeliaSonera after the Swedish telecommunication services company rejected its initial takeover bid... Del Monte (NYSE:DLM) announced it will sell its seafood business, including its Starkist brand, to a company in South Korea in a deal worth approximately $363 million, as the company wants to focus on higher margin food stables like produce and pet foods... H&R Block (NYSE:HRB) reported its fourth-quarter earnings rose 17% from a year ago, to $2.11 a share, beating estimates of $2.03...

By Chip Brian, Editor-in-Chief -- editor@mysmartrend.com

The following equities mentioned above include:

 Comtex SmarTrend
   Alert ---------------------------------------------- Ticker Last Close Trend Direction Trend Price Trend Date ----------------------------------------------------------------------
   AXP 38.04 Downtrend 46.43 5/21/2008 AIG 27.75 Downtrend 44.66 5/8/2008 BUD 62.26 Uptrend 49.10 4/29/2008 C 17.25 Downtrend
   23.73 5/12/2008 DFS 13.57 Downtrend 16.50 6/2/2008 DLM 7.60 Downtrend 8.43 5/27/2008 FTE 27.36 Downtrend 31.47 4/17/2008 HRB
   20.82 Downtrend 21.36 6/24/2008 JPM 35.05 Downtrend 44.81 5/20/2008 KBH 17.72 Downtrend 23.39 4/14/2008 LEN 12.62 Downtrend
   16.49 6/5/2008 LEH 22.25 Downtrend 22.53 6/27/2008 MER 32.70 Downtrend 47.93 5/8/2008 MS 36.71 Downtrend 45.16 5/20/2008 PALM
   6.00 Downtrend 8.39 11/9/2007 

INX -- S&P 500: 1,278 Lo: 1,272 Hi: 1,289 Change: -4.77 

http://www.mysmartrend.com/images/INX20080630.jpg

INDU -- DOW JONES: 11,347 Lo: 11,298 Hi: 11,485 Change: -106.91 

http://www.mysmartrend.com/images/INDU20080630.jpg

QQQQ -- NASDAQ: 2,316 Lo: 2,291 Hi: 2,330 Change: -5.74 

http://www.mysmartrend.com/images/QQQQ20080630.jpg

This report is divided into three sections. The first deals with our 5 proprietary market indicators, the second section examines important economic and business happenings which are expected to affect U.S. Stock market movements and the third section describes specific company announcement and earnings releases. Experience demonstrates that when these 5 indicators reach extremes they can shortly be expected to change direction and move in the opposite direction. When such happens in all or most of the 5 indicators, on or about the same time, followed by a move from below an extreme (oversold) to above that extreme (or vice versa for overbought), a change in market direction is very probable. The near term market moves are measured to identify the best possible returns for traders/investors. Daily price/volume examinations provide the best data upon which to base such forecasts. In this report though, intraday indicators are examined to improve the point of entry timing for the expected move.

Comtex News Network, Inc. is not a registered investment advisor and does not provide investment advice. Investors bear complete responsibility for their own investment research and decisions and should seek the advice of a qualified investment professional prior to making investment decisions. SmarTrend is a registered trademark of Comtex News Network, Inc. Copyright, Comtex News Network, Inc. 2008

Comtex News Network, Inc. ("Comtex") obtains information from sources deemed to be reliable; however, Comtex does not guarantee the accuracy of any of the information or commentary provided. Comtex makes no warranties, expressed or implied, as to the fitness of the information for any purpose, or to results obtained by individuals using the information. In no event shall Comtex be liable for direct, indirect, or incidental damages resulting from the use of the information. Comtex shall be indemnified and held harmless from any actions, claims, proceedings, or liabilities with respect to the information and its use. Comtex does not make specific trading recommendations or provide individualized market advice. The information contained in the Morning Call product is provided as an information service only.

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   As of Thursday, 06-26-2008 23:59, the latest Comtex SmarTrend� Alert, an automated pattern recognition system, indicated a
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