Technical
The market remains in a moderate but volatile uptrend. Failure of the SPX to take out even mild
Oct. 2011 overhead resistance at 1285 over the past week should remain a source of concern for
traders and serves as a cautionary warning for the next couple of weeks. $SPX
Fundamental
The Fed is maintaining Its nearly $100 bil. liquidity swap, but as expected, it has started draining
permanent reserves following a moderate build up for the holiday season. That build up did
increase trader optimism that a new round of quantitative easing could be in the works. It will
be important to see how traders react to further, but normal seasonal shrinkage in longer term
Fed bank credit.
If sizable, additional increases in the central bank liquidity swap program are needed in the
months ahead, it would underscore rising financial stress in the EU and would not be a good
sign.
My weekly cyclical fundamental directional indicator continues to advance modestly primarily
on the strength of falling initial unemployment insurance claims. A rising directional indicator
is a positive for the market and could provide significant additional support if the breadth of
the various measures that comprise it would increase.
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