Stock Market

Technical

Yesterday's closing low of 1390 on the SP500 confirmed that
we are in a down market off the summer and autumn 2007 highs.
A close below spring '07 support around 1375 would open the
issue of a breakaway down and bear market.

The 1390 close yesterday took the market more than 5% below
the 25 day m/a. As discussed often, that kind of deep oversold
has been a clarion call to rally in recent years. The bulls were
in today, but it was likely the Street and major institutions
buying baskets of stock to move others in off the sidelines. I
say that from long experience and after having noted the weak
positive breadth.

Barring a major immediate advance, my buying and selling pressure
gauges are likely to show a sizable and tradable oversold at some
point over the next two weeks.

I have also pointed out that rallies we would see over the second
half of 2007 would grow weaker as we went along. The last one in
the latter part of December was particularly wicked, because it
established a sensible trajectory only to roll over last week.

For the moment, I am going to shelve my expectation of a range
bound market (SP500 1400 - 1500) to reflect yesterday's fresh
closing low.

To recap, the US market is in a down phase that came very close to
a major break. Today's rally is from a deep oversold which could
turn into a nice tradable move if the market stays lame and builds
a base for a week or two. A sharp break in the "500" below 1375
would suggest more trouble is in store for River City.

Fundamental

The analysts remain busy cutting estimates for both 2007 and 2008.
With inflation pressure also still evident, my SP500 Tracker has
dropped to, gulp, 1375. That's a steep move down from the 1600 level
seen back in July.

For a daily SP500 chart, go here.