▪ Significant erosion of the economic background sees the bond markets and short money forwards trading on real world implications, while the equities have been a happy to remain passingly buoyant in the wake of upbeat ideas from various financial luminaries. Not the least of those is Federal Reserve Chairman Bernanke. While he was careful to point out some weak spots in the prepared remarks at the top of his Congressional testimony, the full context of his House Q&A session yesterday (and we can only presume more of the same today at the Senate) was all about how much things have improved.

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▪ How can this be? Because since the turn of the major cycle back in June of 2007 the bond markets have for the most part accurately anticipated weak economic data to come. While we will have much more to say on that after today's extended technical trend discussion, suffice for now to note a few items. First and foremost, US housing remains a mess that is deteriorating more rapidly once again. And in the wake of extremely weak US New Home Sales earlier this week, The US Existing Home Sales figures we will see shortly are a critical indication due to the degree to which it is assumed their strength is weighing on new home sales.

▪ As noted in yesterday's TrendView BRIEF UPDATE, the March T-note back above the clear 117-10/-16 DOWN Break area accompanied by a very similar activity in most resilient sister March Bund back above its 122.70-123.00 area DOWN Break have Negated a month of attempted topping activity. And that points to a push back above early February highs in each of those markets; as the extreme level of a topping pattern that has been Negated is then ripe for violation on the reinvigorated trend. The specifics of the topping attempts were that the mildly rising lows of downside reactions since late January formed the Necklines of Head & Shoulders Tops in each of those markets; …

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▪ Even though the Greek debt concerns have resurfaced as quickly as we suspected they might (no waiting for some silly 30 day horizon from mid-February), the greater concern seems to be on the UK right now. And that's in spite of some additional demands being placed on Greece by EU Economic Affairs Commissioner Olli Rehn. The better mood is because they are seen as achievable (the possibility of a general strike notwithstanding) and in their wake there is likely to be some EU guarantee of a portion of the Greek debt. That in turn is very critical to the success of the planned auction that will buy the requisite time for Greece to more broadly address its ongoing fiscal weakness. The UK on the other hand is viewed as having fiscal problems which are also likely as bad in their way, and is far too large for anyone to guarantee its debts.

▪ All that said, the equity markets are doing rather well in the wake of some sense that the Greek debt crisis will not spill over into a domino effect for other PIIGS on the periphery of Europe. There has also been some reasonably strong economic news this morning out of the Far East and Europe, as Manufacturing PMI's remain above 50 even if there was some slippage in the US. All in all, most psychological background and technical trend indications remain as in last Friday's TrendView GENERAL UPDATE (http://bit.ly/aCKr31.)

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▪ While the central bank focus has shifted to tomorrow's typical Bank of England and European Central Bank decisions, we don't expect any surprises. With the bond markets a bit more buoyant of late, it would be highly surprising for the BoE to increase its Asset Purchase Target after demurring last month. While there will be no small number of attempts to draw ECB President Trichet into meaningful comment on the Greek situation at tomorrow's post-rate decision press conference, he has demonstrated his ability to deflect all comers on this issue at previous meetings; and we can only imagine it will be much the same tomorrow.

▪ …the overall fate of market trends does not really seem to be about those influences or the economic data. It has much more to do with the broader background influences related to sovereign debt, and the general health of the US economy and especially US consumer sentiment and activity.

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▪ Even though January German Factory Orders came in up a whopping 4.3% on the month (versus a +1.3% estimate), government bonds maintained their bid near key resistance. That is particularly important at this juncture, due to the futures contract quarterly expiration rollovers beginning with the Bund on Monday.

▪ The equities also entering a key technical zone right in front of this morning's US Employment report (FEB.) While any bid in the equities producing a minor new high in rejuvenated upside leader NASDAQ 100 future is not much of a surprise, the fact that March S&P 500 future is above Tuesday's high at 1,124.90 is more telling. This is due to it now pushing more aggressively into the key interim 1,125-30 resistance zone, above which it might look like it's returning to a fully bullish trend for a push to new highs…

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