The major indices continue to drift, hovering just below their down sloping 10 day averages having recovered from last Friday’s near term oversold condition. We are not out of the woods yet, and we feel that there is another down leg ahead that will break the lows of last week. This morning we have confirming news out of Europe that they will stand by Greece, but no clear plan as to how. Also we have jobless claims which were well below estimates as the employment picture continues its now very gradual improvement. All in all we would have expected the futures to be up on the news, but they are falling modestly. After all, the fact that Europe has to bailout Greece is hardly news that should result in rampant buying. This current down turn started with fallout from a changing political landscape domestically and that down beat assessment continues. The bears have control, and we suspect that will continue until we see the 200 day/50 week averages tested over the next few weeks.
A key Obama Labor nominee won a vote in the senate 52-33 on Tuesday, but in today’s world that was not enough to uphold his nomination. Such is the power of the filibuster and the abuse to which the GOP is reveling in its minority situation. Thirty years ago the filibuster was used 7% of the time, today it is more than 70%. The Administration’s response, as it has been all along, is to try and reach across the aisle to find an area of agreement. How’s that working? This is an absurd position to be in, and the so-called “nuclear option” to bust the filibuster should be priority number one. We have long held that the politics of fear and cowboy diplomacy and special interest accommodation resulted in the worst stock market performance decade in history. And yet the political mood is moving back towards the neo-con agenda? Ratings at conservative radio and TV stations are soaring as the nation, seemingly, becomes increasingly disgruntled. It may not seem like it but a negative 6% GDP to an almost 6% growth GDP is an amazing nine month turnaround; as is losing 700,000 jobs to being flat each month, as is avoiding financial Armageddon. So why all the angst amongst the ill informed? The Federal debt increased from $1.2 trillion when the new Administration came into office to $1.4 trillion last year, and there were no new taxes, period. The previous Administration overspent by $5 trillion and we barely heard a peep. Those are the facts, and while the ability to spin the reality is quite breathtaking, the actual ability of the populous to buy into it maybe even more so. We always assumed that the so-called right wing “base” would disappear into the dustbin of history. But no, there seems to be a resurgence, and the Tea-Klux-Klan is actually a political force to be reckoned with so we are told. Are you kidding? This is an affront not just to Americans but to human beings. We are at one of the most important inflection points in our economic and political history and having already followed the path of ignorance and stupidity, it is hardly the time to reconsider that direction. The key to our prosperity is to unlock our innovative leadership, to create the industries of tomorrow, not to turn our back on science and technology. We won’t lead by “drill, baby, drill”, but we can if we “innovate, baby, innovate”. We need to embrace intelligence and innovation, not simple ideology. Let’s hope so.


S&P 500 (1068.13) rallied back to the underside of the down sloping 10 day average on Monday and that still marks the interim high. The lows of the last three sessions have been between 1056.50/1060 and if Friday was a significant low, then we would look for that area to hold today. However if we move below 1056.50, then we could well see some accelerated selling pressure. The 270 Gann degree level offers support at 1051. Any close below 1051 is bombs away to the downside and would open the door to our anticipated 200 day/ 50 week buy set up between 995/1025. Conversely any ability to reverse early losses and move above 1069 would be near term bullish; as would a close above the 10 day at 1077. The specter of the down sloping 20 day, at 1096 today, lies right above, however, and certainly in a broader sense rallies remain opportunities to sell.

Nasdaq (2147.87) The high the past two sessions has been the 10 day average exactly. Any move above the 10 day today would occur at 2155 and would most likely be a bullish development very near term. The down sloping 20 day is at 2204 and represents the Holy Grail short set up. Our expectation and hope, however, is for weakness now, down to and below last Friday’s lows and to the 200 day average (currently at 2029). However if we stubbornly refuse to roll over, and look to recapture the 2150/2155 level on a closing basis, we may add some long side exposure in front of a potential meeting with the 20 day average.