Dr Faessel - Market - 12-2-2010

IMPORTANT DAY!

USA to backstop the EU/IMF

Dow Transports break to new cycle highs as does the S&P Mid-Cap Index

Major and almost all Minor indexes break above important resistance. Crucial support holds. Short squeeze looms.

Yesterday's big stock market upshot on well above-average volume cleared important resistance and the technical picture suggests more upside. The McClellan Oscillator is neutral at minus 45 and we are coming off some high bullish sentiment that has petered out. It's likely that the 50-day moving averages will now prove to be good support. Certainly, we're not out of the woods yet and there's enough geopolitical "maybes" out there to make your head spin. Add in the continuing to erode balance sheets of the USA and EuroLand and "good grief" what a horror show?

So now broke EuroLand has broke USA standing behind the bankrupt PIIGS. Talk about robbing Peter to pay Paul? Add in nut-balls in Korea and Iran and the global situation remains mercurial. The good news is that the corporate USA is slowly evolving from its economic and certainly its stock market woes.Goldman Sachs GS just raised 2011 GDP forecast to 2.7% up from 2%. It's the first time in 5 years that the Goldman's outlook is above consensus. And they see unemployment down to 8.5% by the end of 2012.

A few more positives to assuage your consciousness; nominal U. S. GDP has moved ahead of pre-crisis levels as have leading indicator copper. In addition the Manheim Used Vehicle Index and Brazilian consumer confidence have surpassed previous 2007 highs. Also key is that the just reported October retail sales amazingly have matched what they were in August 2008 and are far from their 2007 highs. Yesterday the S&P Retail Stock Index (RLX) ticked above some tough "price" resistance that went back to August 2007. And it's only about a scant 40 points from its all-time highs registered in early 2007. Good news, but this mess will take years to get out of "best case."

More on the global mess. It turns out that the good old USA juiced up foreign banks out of the more than $3 trillion in emergency credit provided by the Federal Reserve during the crisis. More than 21,000 transactions have been detailed with foreign banks starting in 2007. Barclays was the biggest borrower at $232 billion that they have stated has been paid off.

Key Indicators:

·        McClellan Oscillator is NEUTRAL at minus 45

·        Euro - 1.31

·        3-month LIBOR - 0.303

·        CBOE Put / Call Exchange Volume Ratio - 0.81

·        (VIX) at 21.36

·        Copper 3.964

·        10-year Treasury 2.96%