If you felt like a yo-yo over the past couple of days watching the activity on Wall Street, you’re not alone. After yesterday’s sharp losses, the market came back with a vengeance and erased most of the deficit.

The good news of this roller coaster ride is that there seems to be a threshold where buyers can’t resist stepping back in and pushing the market out of the doldrums. If these lower levels hold, I would view this as a stepping stone which may form the basis for further upside moves. Of course, Fed chairman Bernanke’s letter saying the bank will ‘act as needed’ cheered the crowd and no doubt contributed greatly to the rebound.

Our Trend Tracking Indexes (TTIs) recovered as well and are hugging their long term trend lines as follows:

Domestic TTI: +2.46%
International TTI: +0.92%

Again, as previously announced, I will wait for further upside confirmation before moving back into the international markets. Let’s see if tomorrow brings some more excitement.

No positive news anywhere with weakening consumer confidence and more housing weakness leading the charge for the bears. This might not have been too bad of a punch but lack of commitment from the Fed in regards to an interest rate cut sent the market south with the Dow losing 280 points.

Our Trend Tracking Indexes (TTIs) followed suit and are hugging their long term trend lines as follows:

Domestic TTI: +1.23%
International TTI: -0.90%

What a difference a week makes. After last week’s rally, the markets seemed to have calmed down but now we’re right back in the volatility game. As I mentioned in previous posts, I’ve been holding off re-investing in the international arena, despite the international TTI having moved above its trend line.

As this market action proved, we are still in shakeout mode and may be dancing around the trend line for a while. This is why I want to see a clear break to the upside before making any commitments.

This downside move has brought a potential domestic Sell back into the equation. I will liquidate my remaining domestic holdings if either their 7% sell stops get triggered or the domestic TTI crosses its trend line to the downside; whichever occurs first.

Yesterday’s market activity had little influence on our Trend Tracking Indexes (TTIs). Disappointing housing data were too much to overcome and the Dow slipped some 57 points.

The Trend Tracking Indexes (TTIs) are now situated relative to their long term trend lines as follows:

Domestic TTI: +2.64%
International TTI: +1.00%

Even though the international TTI remains slightly above its long-term trend line, I will hold off making any commitments in that area most likely until after Labor Day. Wall Street’s big guns will be returning then, and we should (hopefully) be getting a better idea as to the direction of the trend.

With the markets opening sharply lower today, I will report again tomorrow as to any effects on our trading plans.

After months of work, I am pleased to announce that the weekly StatSheet has been improved by adding an additional column called the M-Index (Momentum Index). The M-Index represents one momentum number, which you can use to simply and quickly identify the top performing funds/ETFs in any category.

Since it is calculated based on the average of the existing momentum figures (4wk, 8wk, 12wk, YTD), you no longer have to agonize as to which one might be most important factor for your selection process: The higher the M-Index number, the stronger the upside momentum of that fund/ETF. It does not mean that a high M-Index is right for you as it also indicates the most volatility. If you’re more conservative, drop down a number or 2 on the ranking system.

Starting with next week’s issue, all StatSheet tables will be sorted by the M-Index in descending order. Want to have a sneak preview? Take a look at the current ETF Master list featuring 470 ETFs. It is updated through 8/24/07.

Feel free to e-mail me a comment if you like. While I will read all comments, I may not be able to respond to all of them.

Not too long ago, I read Malcolm Gladwell’s bestseller “The Tipping Point.” He defines The Tipping Point as that magic moment when an idea, trend or social behavior crosses a threshold, tips and spreads like wildfire.

He explores the fact that just a single person can start an epidemic of the flu, so too can a small but precisely targeted push cause a fashion trend, the popularity of a new product, or a drop in the crime rate based on three characteristics. One, contagiousness; two, the fact that little causes can have big effects; and three, that change happens not gradually but at one dramatic moment.

Of the three, the third trait—the idea that epidemics can rise or fall in one dramatic moment—is the most important, because it is the principle that makes sense of the first two and permits the greatest insight into why modern change happens the way it does. These are the same principles that define how measles move through a grade school classroom or the flu attacks every winter.

It’s a fascinating book that provides plenty of examples of how previously unknown products have become bestsellers virtually overnight, many of which you will recognize. If this subject interests you, this book is for you; I give it thumbs up.

Mark Hulbert of MarketWatch wrote an interesting story about the Dow Theory issuing a Sell signal at last Tuesday’s (8/14) close.

According to the article, the editor of one of the three Dow Theory newsletters said ‘yes.’ This fact will certainly not make headline news on Wall Street since in principle it goes against the all too ingrained Buy-and-Hold mentality.

The Dow Theory was introduced over a 30-year period at the beginning of the past century in editorials in the Wall Street Journal. While it is subject to a wide range of interpretation, because it was not specific enough, the rules for its use can vary widely.

My point is that even almost 100 years ago some smart individuals realized that there is a time when not being in the market might be a good thing for the safety of a portfolio. Why it has not become a standard by which financial markets operate can only be attributed to other facts. My guess is that it would not serve the best interest of the majority of brokerage firms, and their armies of hundreds of thousands of sales people, who are transaction based, meaning they need to be in the market to peddle product all the time.

If Charles Dow were alive today, he most certainly would have completed the work he started, especially after realizing the negative impact a bear market can have on the value of a portfolio. My guess is that he could have been the most vehement opponent of Buy and Hold and may have provided a much needed objective sense of reasoning in an unreasonable self serving investment world.