Dr Faessel - ON THE MARKET -- 12-17-2010

The mighty seasonal Santa Claus Rally / January Effect / “tax selling over” play is showing its bullish wares. Now let's add a Dow Theory confirmation to the mix where both the Dow Jones Industrials and the Dow Transports have recently broken above their November highs.

The McClellan Oscillator is in neutral at a minus 9 indicating that the market is neither overbought nor oversold. Put / Call ratios are running moderately low, but not at alarming levels; (yesterday's CBOE Put / Call volume ratio was a 0.87.) If there's a worry out there it's that investor sentiment is running too bullish, but it tends to have that type of reading it this time of year. The old markets “saw” called the Halloween Indicator that says, "buy in November and sell in May and go away is one of the wonderful aphorisms that has been money in the bank since the New York Stock Exchange was founded under a Buttonwood tree on Wall Street back in 1792.

Today is a quadruple witching day so odd volatility on big volume will pretty much be the order of the day. The big news that may be a cockroach is that Moody's has cut its rating on Irish debt by five notches citing worries about the Irish economy. But hark; never worry― EuroLand bosses are saying that they have "adequate" capital to bail ‘em out. Also, the tax bill passed in the Senate and lordy, of all things, the White House is planning to cut back on Fannie's (FNM) and Freddie's (FRE) market share. The latest estimates by the Federal housing finance agencies show that Fannie and Freddie will cost taxpayers between $221 billion-$363 billion through 2013. Some estimates are as high as $1 trillion. So far we taxpayers are on the hook for $134 billion.

Let's note here that Pres. Obama's fiscal 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years and raise federal debt to 90% of GDP by 2020. Greek debt last year was 115% of their GDP. Oh my!

Last night I heard Congressman Tom McClintock, who is one of the few congressmen with his head screwed on straight, interviewed and he made a good case for the tax deal.

Hallelujah! Naked shorters better watch out:  Overstock

(NASDAQ: OSTK)

 Adds RICO Claim To Goldman Sachs/Merrill Lynch Suit

http://www.benzinga.com/life/politics/10/12/709367/overstock-adds-rico-claim-to-goldman-sachsmerrill-lynch-suit-ostk

The next major resistance is at (SPX) 1313 (neck line bounce highs on August 8, 2008)

Short term price support in the (SPX) is 1133, 1220 then at 1200. The 50-day moving average support is at 1198. 200-day moving average support in the (SPX) is 1141.

Key indicators and metrics:

·              Friday's McClellan Oscillator is in neutral @ minus 9

·              The Treasury 10-year 3.42

·              3-month $ LIBOR at 0.304

·              CBOE Put / Call Volume Ratio – 0.87

·              Euro – 1.32

·              VIX – 17.39

·              US Dollar Index – 80.55

·              Copper – 4.16