▪ And that is not really so very surprising, as the 'politics of envy' always surfaces as the economy and markets slide into a trough after the latest mania lapses. And the March NASDAQ 100 future stalling out at no better than Tuesday's vigorous retest of its 1,890-93 key topping action from last week significantly informed our view that all of the equities could be in trouble in spite of some recent nominal UP Breaks in weaker sisters. DJIA also couldn't hold to its 10,600 area UP Break, and has now capitulated below its Tolerance at the 10,423 selloff low hit on the last trading day of last year. While they may rally in the near term, the tops are now likely in for a much more major correction than anything seen since July.

▪ And as equities are a key driver of trends in other asset classes, that was going to be a very important influence on whether government bonds and the US dollar maintained their current resurgence, as well as whether February Gold held onto its key 1,125-17 support for a push higher; and the latter has now failed and is also nearing its December sharp pullback lows much as the equities are also headed for significant lower supports.

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Last week's sharp weakness can be explained by many factors,… But the key is that it occurred at all. Whatever one may think of how the equities trend will unfold from here, the serial technical failures are now obvious. They also span many variations from March NASDAQ 100 future failure on retests of its 1,890-93 key topping action from two weeks ago, right into the recently more resilient DJIA looking tired on its 10,600 area UP Break from a very rare Flat Bottom Widening Pattern.

As noted previous, the ultimate test was going to be whether March NASDAQ 100 future held the 1,850 area, below which significant supports are in the low 1,800 area, and 1,782 major Fibonacci 0.618 retracement overrun on the way up. Similarly, as DJIA capitulated below its UP Break Tolerance at the 10,423 selloff low hit on the last trading day of last year, it was likely to also violate the late-November and early-December lows in the 10,230 area that formed the 'flat bottom' of the pattern.

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▪ And a goodly portion of the extremely troubling influences which burdened equities late last week was the "throw the Bernanke out with the bathwater" mentality that arose in the wake of the Democrats' loss of the late Teddy Kennedy's Massachusetts Senate seat. While our regular readers know we're not necessarily big fans of the Fed Chairman, even we feel that Congress is enlightened enough to not toss the captain overboard while our leaky economic boat attempts to limp into safe harbor.

▪ Which led us all to the major 'politico' influence yesterday: Mr. Obama's State of the Union Address, in all of its stubborn left-of-center glory. A lot of contradiction in the equities response: is the economic impact of the request for a 'jobs bill' (i.e. further stimulus package) something the equities relish; or more so that it is such a wholly contradictory initiative in the immediate wake of the President's demand for a spending freeze that the markets know it's not something any of his fellow Democrats can't even begin to support?

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▪ While the equities technical picture looks bearish overall, the key will now be whether March S&P 500 future remains below 1,080-75 or manages to ratchet back above it and hold on back in the higher range. It is the fulcrum between the DJIA and NASDAQ 100. (The reasons for that are available in our full report.) Next slower interim support if March S&P 500 future fails is 1,050-42, yet with major support not until the 1,025-15 area. However, if it can recover into the higher range, a retest of the previously important 1,102-08 area is likely, with an outside possibility it might even see 1,125 once again. We shall see.

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▪ A MAJOR REVIEW OF WHY EQUITIES CAN FALL A LOT FURTHER RIGHT AWAY, possibly even with a 'good' US Employment number tomorrow. We encourage anyone who has enjoyed our perspectives to look into this major reinforcement for our negative intermediate term trend view on equities that also informs our view on stronger fixed income and US dollar.

▪ Equities weakness at the end of last week (especially the March S&P 500 future Close below 1,080-75) in the wake of strong economic news highlighted the degree to which US political disarray was a major sign 'politico-' was trumping 'economic' in the near term. However, Monday's gap higher back above that key March S&P 500 range was a sign the overt political discord that made the US seem completely paralyzed at a most inopportune time had abated to some degree. And 'degree' is the operative term. However, nobody should mistake 'detente' for a bipartisan Love-In breaking out anytime soon. Republicans have absolutely zero interest or incentive to become Barack Obama's friend, and help him pass his aggressive programs into law prior to the election.

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