Pretty wild chart here.



Gee guys, can you spell "trapped"?

They just can't make a convincing run at it, can they? The RSI is back in "overbought" territory, acquisition/disposition was almost flat today (after reversing up yesterday) and the MACD hit on an impending crossover and flattened. Stochastics are just short of flashing a "buy".

In other words, the market doesn't know which way it wants to go, but its out of room to maneuver. So, just as with yesterday, the vise tightens further, and the break - when it comes - is getting wound up tighter and tighter.

Tomorrow has a fairly high probability of being the deciding day. If not, next week we simply run out of room. Whichever way it breaks, that's the way you trade it - but beware of a break to the downside - remember, you need to break support for it to be convincing. I've put two support lines on the graph - the first is outside of the wedge (just barely) and the far more significant one is at the 50 and 100DMA. The third is the obvious one - its at the February Lows, and is also roughly at the 200DMA.

A violation of the first is technical confirmation - but may not hold the trend. A break to the 50 and 100, but one which fails to penetrate and then reverses, may be a buying opportunity - that's right in the middle of that gap, and would qualify.

But a break below the 200 is very, very bad. If we get that, look out below!

A strong and convincing run above the channel on strong volume and with strong internals voids the pattern for now. I'm going to be tough to convince that anything other than an explosive breakout is "real" however - the MACD and RSI are both in "stupid" territory on the upside, and while a market can remain there for a long period of time the MACD in particular hasn't seen this sort of level since late '03 and right at the turn of the year into '04! A weak "push" above the wedge could easily be a sucker punch in wait.

Ok, on to more fundamental things.

Chavez rattled his saber some more today. This man is a true nutball but he's now threatening the Venezuelan steel and banking industries! He's also taken over their oil industry. This is bad simply because we buy a lot of our oil from him, and having it pinched off would hurt instantly and deeply. With the market as tight as it is he can also find other customers for his oil, which doesn't help our case.

International Paper made a profit, but only on asset sales. Revenue was down. What do they make? Duh. Why less paper products? Gee, you think that might have something to do with business?

A Dutch court froze the sale of LaSalle Bank, threatening the ABN/HSBC bank deal. I'm having trouble finding out exactly how much leverage is wound up in this one; being that its outside the US its a bit tough to get my arms around it. I don't think this deal blowing up creates an "exogenous" event....... I'd love to be able to say that with certainty, but I can't.

In the US, The Senate had legislation introduced today to force lenders to assess mortgagees ability to pay before granting mortgages (gee, responsible underwriting?) The House is trying to increase the maximum agency loan amount (dumb) and lowers down payment requirements (dumber). Finally, the Fed announced that it will hold a public hearing on potential regulations (which do not require Congressional approval) to tighten oversight. Most importantly, the Fed can impose regulations on other than banks, which many people do not realize. The Senate Bill and Fed moves sound good - the House is another matter. Agency requirements are stupid loose now - if anything, they need to go the other way.

UBS reported lower earnings amid what smells like a blowup in their credit hedgie Dillon Read. Ok, "blowup" might be a bit strong. But certainly, they had a little problem with a bad bet or three.

If you didn't have enough evidence that the economy is slowing and consumer spending power is drying up, you might want to read this little ditty..... gee, do you believe this is a trend yet or what? Target, WalMart, a bunch of "working class" restaurants, and now Sears/K-Mart.

Oh, and finally, this - now we've got the lawsuit gravy train starting up. I have severely mixed feelings about this. To the extent that borrowers were intentionally misled, I support it.

But to the extent that the borrower was a party to the fraud, its a different matter. And since essentially all of this will turn on "he said, she said" when it comes down to what was talked about between the broker and borrower, I'm having trouble swallowing it.......

One "gotcha" to pay close attention to - bond ratings and prices (corporate paper, especially of mortgage lenders and related.) It looks like the downgrades are either starting or about to. There are rumblings all over the street about it; if that does get going fast and furious, it will precipitate serious problems with corporate liquidity - exactly the short of exogenous event that can break the back of a Bull Run.

Oh yeah - the Canary. He's being chased by the Cat. So far, he's getting away....... so far.....

More if anything interesting comes up this evening.....