▪ That's the only conclusion one can draw from the mutual strength in the equities and US dollar, not to mention the weakness of the bond markets, Gold and Crude Oil. Either there has not been enough US dollar carry trade borrowing put into speculative equity positions to affect markets, or there is enough portfolio manager window dressing to fully offset it. Whatever one may think about equities' prospects, even the obvious triggers for potential bad reactions do not weigh on the markets.

▪ That said, as we noted previous, any DJIA 10,500 area UP Break (actually more so on the order of its 10,580 rising 'topping line' this week into next) is now well calibrated to the decision in March S&P 500 future, yet may still falter if Holiday volume is too light.

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▪ While equities became somewhat moribund on Santa Portfolio Manager window dressing late last year, DJIA and S&P 500 can only remain quiet near highs for so long prior to a bigger decision. The same is likely true for foreign exchange markets which have spent a fair amount of time churning sideways.

▪ Any DJIA 10,600 area UP Break and possible subsequent failure is now well-calibrated to the decision in the March S&P 500 future, as it has not been able to surmount Tolerance into the 1,120-25 range.

▪ Beyond that, other multi-asset class decisions remain consistent with the influence of better US economic data, yet with weak indications elsewhere. One of the key decisions on equities resilience was weak government bond markets, as March T-note finally violated its 117-24/-16 area support, with failure below the interim 116-20 level leading to the far more major 115-00/114-16 support.

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▪ And that is in spite of some current trend divergence from the normal nominal intermarket price action in markets as diverse as the long dated government bonds, energy and precious metals. ▪ What is most interesting this week is the March S&P 500 future push above the important 1,125 area, which places the burden of proof on the bears to get the genie back into the bottle by Friday's Close. Otherwise, higher resistances in the 1,180-1,200 or higher area are likely to be seen.

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▪ Headline improvement in the US ISM Non-Manufacturing Index (DEC) and its Employment component are not necessarily constructive in their own right, and are accompanied by other troubling economic data. While upon the month, the headline figure is still only back to balanced at best, and the employment aspect remains down in contractionary ground. And all of this relates back to the services sector and consumer that are now the fragile key to any further sustained economic and equity market improvement.

▪ The reason all of this is so important into today's FOMC minutes release is the timing of that meeting, which was prior to the recent mortgage rate increases that have weighed on housing. They will be a significant indication of the Fed's sentiment on ending its asset purchase program without the influence of the recently weaker US housing data.

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▪ As we noted at top of last week, Stop-Go 1970's style volatility likely meant major trend swings would develop fairly quickly this year. While equities were somewhat moribund on Santa Portfolio Manager window dressing late last year, DJIA and S&P 500 could only remain quiet near highs for so long prior to the bigger decision we got at the end of last week. That strength above resistance levels was that much more impressive for having occurred into the face of significantly weak late week economic data.

▪ The rare Flat-Bottomed Widening Formation in DJIA makes the 10,423 end of year pullback low even more important than prior to the incipient 10,600 UP Break. Read more...