Grinding Lower

Alot I could write about. This past weekend the news was very bearish for equities and the world economies. The G20 ended up a disaster with no one being able to agree on anything and indication that governments were going to tighten anymore. This means less stimulus elixar moving forward. Supposedly there was heated debate in South Korea at the meeting. Than reports of a German court considering an injuction against the EU rescue package. The futures were way down over night only to bounce back with the markets actually opening up before rolling over and giving it all back.

Just like last week when we were up at 1105 and I said we really had not gone anywhere, this week we are right back to where we were two weeks ago. Around that 1140 to 1160 area. The markets really continue to go nowhere though I am sure bulls and bears are feeling huge moments of exhilarition followed by worry. We are still very oversold. In fact one could make an argument that we are even more oversold than when we were here last time a couple of weeks ago. I know that doesn't make much sense but the day was so bearish on Friday with so much selling that it put a large dent in selling potential while only getting us back to where we were two weeks ago.

The line in the sand is still 1040 for the bears. Unfortunately for the bears, I am not sure there is enough dry selling powder to power through it on the downside without first bouncing. It would take a massive selling event to break through and despite the end of the day today it doesn't necessarily look like there is massive selling available without some major news.

Ahh but major news we could get. Just from a bears perspective it is hard to bet on the timing of such news. There is alot of debt being issued in Europe this week by the likes of Belguim, France, Germany, Austria, and Spain. Problems in those bond auctions could definitely cause the next batch of selling.

On the upside I would start getting nervous if we were able to power back up above 1070 and than 1080. That is 20 to 30 points away so somewhat of a cushion where the markets could sort of move up or bounce around for a day or two.

Fundamentally, the world is being roamed by grizzlies. Deflationary pressures is back with a vengence, world credit problems is once again showing its ugly head, and governments are starting to realize they can't spend their way to prosperity.

In the short term I don't have much of an opinion though I think at least for the next day or two it favors the bulls unless some major news out of Europe once again dominates the headlines.