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Good Morning. In an effort to keep things brief and to the point (which is likely to be a serious challenge for me), let me say that the state of the market appears to be tenuous at the present time. In short, while the bulls appear to have the situation well in hand from the intermediate-term (3 weeks to 3 months) and longer-term (3 months to a year) perspectives, yesterday's late-day volatility raises some questions in my mind about the potential for future gains in the near-term.

Just when you thought our heroes in horns were about to embark on another journey into new-high-land, a headline out of Germany at about 2:00pm eastern gave the bears the opening they had been looking for. With the S&P perched right at its closing high at 1593, a report hit the wires that Germany's Bundesbank had issued an opinion for the country's high court opposing the OMT. (The OMT is the ECB's "bazooka" that could buy as many bonds as needed to stabilize the euro. Oh, and for the record, the OMT doesn't even exist yet.) With sell algos ever at the ready for such things, the news pushed the S&P down, down, down for the next 45 minutes. Thus, the question of the day appears to be if the eurozone crisis can stay contained for long if Germany is not on board with the primary stabilizing factor.

But to be fair, we shouldn't blame the entire 9-point decline off the top on the Bundesbank. You see, more than four years after the credit crisis ended here in the U.S., Ben Bernanke said Thursday that things are not yet peachy keen in the banking system. The headline the received most of the attention was a line from a Bernanke speech in which the Fed Chairman said that vulnerabilities remain the financial system. While not exactly an earth-shattering statement, the algos remain back on high alert after the fake tweet this week and appeared to do their thing immediately after the quote hit the wires.

I know what you're thinking. First, this type of stuff with the algos creating intraday volatility in both directions goes on all the time. Second, the overall trend clearly favors the bulls. And thirdly, there is always something for the bears to worry about, right? However, my point is that for the second time in a week, the computers sent the market into a tailspin at the drop of a hat. And frankly, this type of action worries me a bit.

The bears can now argue that yesterday represented a "failure" at the old highs (the S&P hit its high water mark on 4/11), which is a clear negative according to the technical analysis textbooks. As such, a move below yesterday's low of 1579 would likely add fuel to this argument and bring in technical sellers. Remember, there are plenty of traders who are "riding the range" (buying the bottom of a trading range and selling the top) these days. And frankly, our Market Environment Models' signal to "reduce leverage" in our active risk manager programs at yesterday's close felt pretty good for specifically this reason.

On the other side of the court, the bulls will argue that the Japanese QE program is creating a boatload of new cash that is sloshing around the financial looking for a home. As one analyst wrote yesterday, overwhelming Japanese buying appears to be pushing up the prices of bonds, stocks, gold, silver, and even Apple. So, with the Japanese effectively doubling up on Ben Bernanke's QE efforts, there is indeed an awful lot of new capital being created these days.

The good news here is that if the "money sloshing around" argument is real, then any declines in the stock market should see folks implementing a BTFD (buy the freaking dip!) strategy. As such, any pullbacks in the market could very well wind up being short and shallow.

From my perch, the bottom line is this... The money sloshing around could easily cause traders to ignore the concerns about the state of the U.S. economy, the European debt crisis, and China's slowing economy. However, as they have displayed this week, the bears do have some additional weapons to work with. As such, I wouldn't be terribly surprised to see a trading range remain in place between 1540 and 1590 for a while longer.

Publishing Note: My travel schedule is about to get pretty nutty. First, I am first attending NAAIM's annual conference with meetings starting on Friday. Then I will be traveling in Europe with my wife for two weeks. And finally, the day after we return, I set off to fetch my youngest from college. So, I will be schedule-challenged for much of the next three and one-half weeks and will publish morning commentaries as time permits. However, rest assured that since vacation isn't a word in my vocabulary, I will be monitoring the markets on a daily basis.

Turning to This Morning ...

The overseas markets are mostly red this morning as traders appear to be growing more cautious. The comment yesterday from Fed Chairman Bernanke about the risk still in the financial system got people's attention. In addition, the Bundesbank's opinion that it opposes the OMT has put concerns about the eurozone crisis back on the table. And with Europe's markets down, the U.S. futures are following suit in the early going.

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell ...

Major Foreign Markets:

- Shanghai: -0.97%

- Hong Kong: +0.66%

- Japan: -0.30%

- France: -0.77%

- Germany: -0.24%

- Italy: -0.62%

- Spain: -1.05%

- London: -0.40%

Crude Oil Futures: -$0.38 to $93.26

Gold: +$1.70 to $1463.70

Dollar: higher against the yen and euro, lower vs. pound

10-Year Bond Yield: Currently trading at 1.701%

Stock Futures Ahead of Open in U.S. (relative to fair value):

- S&P 500: -2.94

- Dow Jones Industrial Average: -27

- NASDAQ Composite: -7.00

Thought For The Day ... If you don't like something, change it. If you can't change it, change your attitude. -Dr. Maya Angelou

Positions in stocks mentioned: none

Source: Daily State Of The Markets: The Argument -- Money Sloshing Around Vs. Macro Fears