A poor week with a nearly 4% loss in the S&P 500, and 5% loss in the NASDAQ.  Traders actually got what they were begging for with "QE Lite" but the pendulum swung from "I get more easy money from the Fed" to "why exactly is it necessary for the Fed to be continuing to hand out easy money?".  With the current Fed action, we are in a holding period where the Fed is keeping the balance sheet at status quo level - each time it shrinks naturally via maturation of current holdings, the Fed will step in and make new purchases to replace the old.  Hence "QE Lite".  Now the drumbeat begins for QE 2.0, and I'm sure we'll have a very similar circus to what we had the past few weeks.  It should frighten people that the Fed continues to go to novel (read: desperate) measures to prop up the system, but since most market participants can only look 2 feet ahead and only see trees rather than a forest, they are cheering it on (if not outright demanding it).

Both China and copper held in there last week, although China looked dangerous Thursday .. a rebound Friday held the Shanghai index above needed levels.  If one read's Bloomberg reports on why Chinese stocks rally most days, it is ironic how the Chinese are trained just like the Americans now.  Almost every story centers on "hopes for increased liquidity".  Speculators in all markets now apparently simply pray for central banks and governments to hand them money.

In currencies, the "safety trade" - while dominated by the yen, finally saw a reversal in the dollar; this is at a key level this week.  The Euro was plastered.... but talk about perfect technicals.  HAL9000 took it directly to the 200 day and then as the tea leaves would have it, the run was over.  So we're back again to 'risk on' & 'risk off'.... if the dollar continues to run... and bonds continue their freefall in yields, you have a risk off environment that should not be messed with.

Semiconductor action (a leading indicator) is also incredibly poor, but this is one oversold chart and I'd expect a bounce sooner rather than later.  While Cisco is not "semis" it should also bounce (dead cat) in some fashion this week, which will help NASDAQ.  That semi/Cisco bounce will be celebrated by the "Fast Money" crew, and analyzed to death as a harbinger of a "tide turning" by those who only know how to be long, but until proven otherwise it will be nothing but a technical correction of a very steep drop.

Most earnings reports this week focus on retail, and as both JCPenney and Kohl's (read: middle America) forecast "meh" late last week, this is fitting perfectly into our mosaic of focus on those who sell to foreigners, especially Asians, and fear those who are reliant on Americans (unless it is very low end or very high end).  The main hope for bulls this week is that expectations are low enough on either the housing market or retail stocks and/or James Bullard sings songs of QE2.  I don't see QE2 until post election to early 2011, but it will hang over the market like a stench until then.