CautiousInvestor

Key Factors Driving the Market

While not disagreeing with anything said, what I have observed is broad, alternating themes of (1) reflation which is accompanied by strength in commodities and equities and (2) deflation which is accompanied by strength in the dollar and US Treasuries.

These relationships can be see here:

stockcharts.com/charts...

Preview from Europe: Fear Trumps Hope as Dow Falls Below 8,000

In my mind, it is clearly the global financial crisis that strikes fear and terror into this market. While banking and the real economy are intertwined, yesterdays action was driven by the former.

The comment by Roubini, State Street earnings, a report the BAC would need an additional $80 billion of capital and the international stories all contributed to the massive sell-off.

Credit will not thaw until the global credit crisis is resoved and it is my belief the host of measures already taken will prove insufficient. Sorry for being such a pessimist.

The Bull Run Begins This Week

I make a habit of being as respectful as possible on this board and others but this article taxes my restraint.

And while there may be an Obama bounce, though that is not certain as many earnings will be released next week, the structural aspects of this decline are worsening as they surface.

Declining estimates of economic growth, rising foreclosures, collapsing industrial production, growing estimates of what is needed in the stimulus package, rising estimates of banking sector losses and growing unemployment are simply the first things that come to mind.

If we face deflation and the corrective actions are not equal to the task, we are some ways off from the streets of Barcelona where the bulls run.