Charts courtesy www.stockcharts.com

This was an eventful week on Wall Street. On Tuesday, the Nasdaq Composite negatively reversed after slamming into resistance at its 200-day moving average (DMA) line. The very next day, all of the major averages sliced below their respective 50 DMA lines which had acted as support in recent weeks. Oil prices plummeted to a five-month low after facilities in and around the Gulf of Mexico managed to dodge Hurricane Gustav. Energy and other commodity markets came under pressure due to a sharp advance in the US dollar. 

Last month, the US dollar enjoyed its largest monthly advance since October 1992! Keep in mind that there tends to be an inverse relationship between commodity prices and the greenback due to the fact that most commodities are priced in dollars. This sent a slew of commodity related stocks lower which heretofore served as leadership for the major averages. On Wednesday, stocks ended in the red after the Federal Reserve released its Beige Book. The report showed that businesses across most of the US were "slow" last month and the housing market continued to erode. Underneath the surface, there was virtually no quality leadership to speak of. Volume, an important indicator of institutional demand, increased as the market sold off, which added several distribution days to the recent count.

All this set the stage for Thursday's deleterious action. The major averages gapped down and closed below their 50 DMA lines on heavy volume which effectively ended their fledging rally. A series of tepid economic data points were released which sparked a broad based sell off in equity markets around the world. Then on Friday, stocks opened sharply lower after the Labor Department released a weaker-than-expected jobs report and said that the unemployment rate climbed to a five-year high of +6.1% in August. Payrolls slid by -84,000, and the prior two months were revised lower by -58,000. Around two hours after Friday's open, the bears ran out of steam which allowed the bulls to show up and erase the session's losses. Volume totals were lighter than the prior session as the major averages ended mixed.

The disconcerting data released all week raised the likelihood that the Federal Reserve will postpone any future interest rate hikes until 2009, which may help promote economic activity. Officially, the US economy has still not fallen into a recession but the weak data increases the chance that President George W. Bush will become the first president since Richard Nixon to oversee two recessions. 

PICTURED: The benchmark S&P 500 Index positively reversed after a week-long sell off.