Short Term Review

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Below is the "Plain English" summary from the first page of the report.

Stocks: Our main focus is on tactical support at 1029-1020. Since last week’s low was a minimum objective and since we do not think that last week’s low was the low, it seems reasonable to expect the S&P to take the next step and retrace at least 50% of the July-January rally. That would imply further weakness toward 1010. That would be more than enough to decisively violate tactical support and lock in the entire rally from March’s low as a complete pattern.

10-Year Yields: In previous comments we had mentioned that the decline in 10-year yields since late December had locked in the November-December rally as a complete pattern that. Continued weakness has upped the ante a bit because we can now say that the larger rally that began in October has been reversed.

US Dollar: Given its weighting in the dollar index, it is not surprising that our outlook for the euro is essentially the opposite of that for the dollar. Virtually everything that is bullish for the greenback is negative for the euro. If, anything, the euro’s weakness is more apparent than the dollar’s strength. We say that because the euro has retraced almost 61.8% of its March-November decline, the dollar index has only retraced a bit more than 38.2% of its March-November rally.

Commodities: Oil is now in a confirmed downtrend. The decline from January’s high is impulsive and is deep enough to lock in the December-January rally as a complete pattern. While the uptrend from the December 2008 low just above 31 is still intact, oil is now in the middle of the key 73-69 support range