▪ Just as we noted yesterday, the equities strength above resistance levels was that much more impressive for having occurred into the face of significantly weak economic data. That they put on a decisive late session rally on Friday in the wake of the very weak Consumer Credit number was a sign something else was afoot.

▪ And the near-term technical structure in the weak sister DJIA (albeit relatively a bit firmer of late) offers the clearest picture of whether the overall equities trend remains bullish. The key to that will initially be whether there is any slippage as modest as a failure back below the 10,423 low hit on the selloff on the last day of 2009.

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▪ Just as we noted yesterday, the equities strength above resistance levels was that much more impressive for having occurred into the face of significantly weak economic data. That they put on a decisive late session rally on Friday in the wake of the very weak Consumer Credit number was a sign something else was afoot.

▪ And the near-term technical structure in the weak sister DJIA (albeit relatively a bit firmer of late) offers the clearest picture of whether the overall equities trend remains bullish. The key to that will initially be whether there is any slippage as modest as a failure back below the 10,423 low hit on the selloff on the last day of 2009.

▪ That has become even more critical in the wake of the DJIA push through the 10,600 topping line resistance of its rare Flat-Bottomed Widening Formation (best seen on the daily bar chart, with the lows forming the 'flat bottom' on November-December pullbacks in the 10,230 area.) Rather than just an interim level in a developing pattern, 10,423 is now the Tolerance of a bona fide UP Break; and failure (i.e. daily Close) back below that level could represent a sustainable trend reversal.

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▪ The first of which is of course Monsieur Trichet's post-rate decision press conference in progress at this time. However, even that press conference is accompanied by further important US economic data, which leads to a crescendo of US dominated fundamental influences tomorrow; with a special twist on the debt auctions side.

▪ Another downbeat Federal Reserve Beige Book yesterday (more so than previous) illustrated the degree to which the equity markets are happy to thrive on expectations of endless US central bank liquidity provision. That that in turn illustrates the degree to which the burden of proof remains on equities bears as those markets approach critical technical trend decisions (which also still have implications for the other asset classes.) The March NASDAQ 100 future approaches a more important trend decision once again after its recent selloff from a new high into the 1,900 area on Monday was followed by a daily Close back below last Friday's 1,890 closing price. That established a DOWN Closing Price Reversal (CPR)…

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▪ And that likely has implications for other asset classes(especially bonds.) Whatever one may think about equities as an indication of future economic growth, they have absorbed an incredible amount of weak economic data lately on the back of better corporate profit expectations.

▪ A while back we noted that especially American culture tends not to evolve smoothly between phases, and is subject to the latest 'mania' as the driver of the mass psychology. As noted, in the context of the global imbalances which prevailed previous, it would be a bad sign for the real global economy if the next American mania turned out to be "Frugality." Well, it's here. Aside from the anecdotal evidence from those who used to brag about bling now cooing about savings at Costco, the continued significant reductions in US Consumer Credit fit right in with other recent weak economic data like yesterday's much weaker than expected December US Retail Sales and the broader view from the Merrill Lynch Affluent Survey. And that is just the latest bit of weak data leading into this morning's…

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▪ March NASDAQ 100 future recovering into the 1,890-93 key topping action from last week left all markets a bit critical into Wednesday morning prior to the selloff; and recent lows are fairly important levels as well. The ultimate test will come based on whether it also holds on no worse than the 1,850 area tested last week. The other critical indication which works very well with that is whether weak sister DJIA 10,600 area UP Break maintains, or it capitulates below its Tolerance at the 10,423 selloff low hit on the last trading day of last year.

▪ And as equities are a key driver of trends in other asset classes, that will be important for whether government bonds and the US dollar maintain their current resurgence, as well as whether February Gold holds onto its key 1,125-17 support for a push higher. Obviously, the difference is that the influence into the bond market is generally in the form of counterpoint, and the Gold will be more directly influenced by the equities trend.

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