-->FED TO THE RESCUE: Report from the ADEN - Sisters as of to-day 23.8.2007:

Last Friday, the morning following our special alert, the Federal Reserve saved the day by lowering the discount rate a half percent in a dramatic move to help stabilize the financial markets... and they quickly responded... most markets bounced up and are stabilizing, but it's still to be seen if the volatility continues. The discount rate cut is a start, but let's see if Fed Funds is cut as well and by how much. The complex and spreading sub-prime mortgage problem is not over. The financial stocks, short-term rates and the yen carry trade currencies will be the markets to keep an eye on for any further vulnerability in the markets.

The Dow Jones Industrials and the Australian and New Zealand dollars bounced up from their major supports. And while the decline was steep, the major trends remain up. This is good news for a market trying to get back to normal. Also keep an eye on the yen and the 90 day T-Bill rate. The yen turned bullish as investors scrambled to unwind their carry trade loans. Let's now see if the yen stays bullish above.8450. The 90 day T-Bill rate fell to 2.95% on Monday as the rush to safety continued. It's now rebounding but it should at least get back above 4% to see further calming (see Webextra).

The dollar hasn't risen that much, when considering all the talk about the strong dollar and the run to the dollar. Since dipping into record low territory a month ago on July 24, it has risen about 2½% and it's having a hard time staying above its 15 week moving average.... hardly a pillar of strength (see Webextra). But that doesn't mean it can't rise further. The dollar index is firm above.8050. A close above 82 means it could rise to possibly 84, but even if it does, it would still be bearish in the long term. The currencies are rebounding. They are solid and bullish above 1.9750 for the British pound, 1.34 euro,.8200 Swiss franc,.7880 Aussie dollar,.6900 Kiwi and.9350 Canadian dollar. Keep your positions.

Most markets are oversold or extremely so. The bounce we are now seeing in the U.S. and world markets could carry on short-term. But the Industrials will not show renewed strength until it rises and stays above 13650. Likewise for the Transports above 5100. This means the Industrials will be consolidating in a bull market by staying between 12850 and 13650.

Bond prices have been rising for two months while long rates decline. The yields are oversold short-term but even if they rise to 4.90% on the 10 year yield, the trend will still be down for rates and up for bond prices.

Gold has held up very well during the turmoil but silver, gold shares, and palladium haven't. Gold has been a safety haven when considering its stability as it's held well above its June 27 low. Gold has been essentially consolidating since last March; a break above $686 basis December would show good strength, and above $696 would be very bullish. Meanwhile, as long as gold stays above $645 the June low and $641 the 65 week moving average, it's bullish (see Webextra). Gold shares are bouncing up well, as are our natural resource shares.

Silver is disappointing. It's weak and bearish but it's also very oversold. It could bounce up to $12.60 but let's see if it can surpass it (see Webextra).

Crude oil closed below $70. If it stays below $70 it could go to possibly (yet unlikely) $65.50. It could be a temporary dip for now. Copper jumped up today as demand surged in China. This is saying that a global credit squeeze is unlikely to affect the five year bull market in commodities because it's being driven by strong demand in China & India and the other emerging countries.

The tidal wave fall over the past week pulled down most markets and shares. Of all our recommended positions, the following held up best: AEM, GLD, XBI, PBG, SLB, FXC, FXF and ICPHX. The others are fine and many are rebounding nicely, like BHP, FCX and XLB, from an extremely oversold area. In our special alert we sold our weakest stocks and if you sold, stay out of those.

We recommend to start buying new positions in the following: AEM and SSRI for gold and silver shares, BHP, FCX and XLB for natural resource and SLB for energy. Keep some cash aside for possible further lows and keep the positions you have.

Best wishes and until next Wednesday, August 29,