▪ And that is after weakening signs were not enough to significantly weigh on the equities last week. Trends remain significantly contentious on equities' failure from major resistance, even if they are still buoyed by the continued central bank "liquidity forever" battle cry. Which makes the early-mid portion of this week somewhat critical, as even the most influential non-US economic releases are mostly into Wednesday, with an accent on US housing data. Whatever else comes during the early-mid week data and report crunch, it will once again be most interesting to see whether DJIA can surmount the 10,500 Tolerance of major 10,300-350 resistance, and December S&P 500 future can also finish the week above its 1,102-08 major downside Gap from last October's massive failure.

Read more...

▪ While economic data so far in a very pressurized week has been slightly to the positive side, the proof will be in the equity market pudding when is all said and done tomorrow. That is due to a dual consideration that equities are up against far more significant technical decision thresholds than either the fixed income or even the foreign exchange, and an accelerated reporting schedule with no US economic releases after tomorrow, and (noted in yesterday's Weekly Overview) very little elsewhere. The real decisions await the important news later this morning and FOMC meeting minutes this afternoon, along with further important US economic and housing numbers tomorrow (see yesterday's analysis http://bit.ly/6FhQ6l.)

Read more...

▪ That flies in the face of historic tendencies (albeit we've seen that a lot lately), and received wisdom on assured economic recovery and pending inflation. While economic data continues to remain somewhat on the positive side, the proof does not seem to be there in the equity market pudding, with DJIA still stalling at no better than the 10,500 Tolerance of major 10,300-350 resistance, and December S&P 500 future also finding continued resistance not much higher than the top of the 1,102-08 major downside Gap from last October's failure. Those are both areas above which the markets must finish the week in order to signal any chance of extending their already substantial rally. All of which still has that much more import in light of other asset class decisions, as December T-note surmounts its 119-16/120-00 resistance, with next potential targets in the 121-16 area. While there are many instances of a mutual rally in these two asset classes in the early phase of a recovery, the extent of the equities recovery and sentiment by the bulls that it has much farther to go still makes the current situation somewhat of an anomaly. Also note US Dollar Index below previous support in the .7500 area is only down to the .7450-30 area critical Tolerance factor that we have been noting, and December Gold future is not significantly decisive at this time into the 1,180-1,200 range, the higher end of which is not just psychological...

▪ Oil exporter default is a shock insofar as it raises concerns about credit markets once again. This moves something that the markets had generally thought was a settled issue back into the realm of "known unknown" (thank you Mr. Rumsfeld.) And the extent of shock is proportional to this potential problem being an "unknown unknown" to most of the world (other than those directly involved with Dubai financing issues) until yesterday's announcements. The equity markets response has been consistent with the old adage that it "dislikes nothing quite so much as uncertainty", which has suddenly significantly resurfaced where confident assumptions of further economic and equity market strength had stood previous.

Read more...

▪ Steady is the word, as the sums directly at stake in Dubai are a drop in the proverbial toxic US MBS and commercial property bucket. Yet, the real issue is whether this is a beginning of more revelations, or the proverbial buck (or UAE dirham) stops right there. Post-9/11 recovery was unexpectedly derailed by accountancy scandal.

With the macro situation in flux, technical trend evolution counts. The counterpoint between equities and govvies is intensifying once again even though central bank liquidity support continues to encourage aggressive fixed income bids.

Read more...