It was a late capitulation based on speculation causing a total pulling of bids; and that leaves a technical status for the S&P and Dow Industrials, that if followed-through in any way resembling real carnage, could set-up a conclusion to the selling phase yet-again; possibly more importantly (additional comments at ingerletter.com). Carnage is not the right term for even a washout that occurs from here, but if this cascades in absence of 'exogenous' events actually occurring, that's bullish. The other alternative would be that something horrific actually occurs, which changes lots of things; though we've known (for not only months but years) that remains the case (regarding risks).

In fact we suspect nervousness ahead of the Inauguration contributed more than first meets the eye, partially because there was a 'terror threat' directed against Boston in the course of the session, that was basically unreported in most mainstream financial media recounts of the early flow of events. Months ago forewarning something bad was being planned (not likely coincidental) by penetrations of the Arizona and Texas border (probably California too, but the others were established or verified by normal sources, or by private citizens finding Arabic diaries on their property etc). Remember a Moslem woman found in the brushes near the Rio Grande river near San Antonio with thousands of cash in her pocket, and a ticket to Kennedy Airport? What have any of us heard about it since? Nothing. Means she was likely part of a conspiracy.

In any event, the Boston Herald is reporting that 'Federal and Massachusetts state authorities are investigating a nuclear terrorist threat against Boston, after a man calling from Mexico told the California Highway Patrol that he smuggled two Iraqis and four Chinese over the border'. I'm simply quoting the story on the details.

According to the Herald, the individual refers to some sort of nuclear material that will "follow them through New York up into Boston.'' According to the Boston newspaper, the caller had not identified himself and he did not show up for a meeting with federal investigators in California but he did leave pictures of four Chinese or Arab men, plus some names, at a 'drop' site at the Mexico-California border. The FBI notified Boston PD and Massachusetts (presumably New York State Police because of a presumed transit route) authorities early this morning of the threat, and it leaked-out into media sources as late afternoon developed. We think this story stymied market rally tries, in the midst of earlier crucial technical thrusts deflecting just shy of the S&P 1200 level.

No doubt, the S&P might still have had a 'dead-cat' variety bounce condition anyway, because that is essentially what the originally-choreographed 'A-B-C' structure would look like as it evolved. (Reserved remarks) irrespective of requiring new subsequent movements lower, and we think that is exactly what took the steam out of enthusiasm for the market on a daily basis; also right in the middle of a nominal Expiration week.

For those who take (the alert) lightly, or don't think it could be serious; well, the Mayor of Boston doesn't concur. He ordered his Fire Commissioner, the state's Homeland Security Chief into his office at City Hall, where they met with not only FBI officials in the course of today, but anti-terrorist folks from CIA, and ICE (Immigration/Customs). Sources now say it's probably a hoax; we absolutely positively hope that's all it is, but at the same time it was enough to curtail (further probing of intraday market levels).

Daily action . . . generally thought the nuance of this turnaround to the upside really began last week, with a 'creeping-forward' during much of last Friday's pre-weekend rally. We've allowed both for rebounds to work higher, and for lower prices to be seen later. Now we have what can be called a 'very scary' scenario (if real) that threatens possibly not just Boston (again, if valid), because though authorities of course got a 'tip-off' about Boston, who's to say that other smuggled terrorists (further discussion).

And sure, it's too bad that the Nation doesn't have Laser Guided Electricity weapons at the ready yet, because firing any of older conventional defensive weapons in any port or city in this Nation would wrack all kinds of havoc, and endanger the innocent, in the process of trying to respond to a frontal assault against a fortified facility or in a port situation. There was talk today that NYPD is involved now (reserved comments).

What did get discussion was the fairly precipitous decline of the March S&P, rapidly back down to the vicinity of the lows last week, which preceded the recent rebound. Is this beginning the 'C' wave downside slide, after a 'B' wave rebound? (Reserved.)

The technical pattern continues to look ragged and negative; it is flat-out that way in terms of daily basis charts (reserved technical discussion); but we also know pattern evolutions can change on a dime if events permit, or in this case an ideal absence of events allows the market to attempt resuming what it was doing anyway within hours.

Concurrently, corporate earnings are not disappointing; inflation data's comforting to an extent (financial press reporting that as the reason for the market hiccup is a cover for the real concern of the day we think, as those numbers, as well as the early report of jobs claims, were better than consensus estimates by the way). If anything, docile economic growth allows the Federal Reserve to keep moderated polices in action for the immediate future (that's why T-Bonds have done relatively well of late (in fact rates have been in the vicinity of six-month lows for 30 year Treasuries recently).

In any event, obviously there's no updraft in the stock market sufficient to deny odds of a subsequent 'C' wave decline in the Senior Averages, much of which may depend not on technical market conditions, but events as they play out in the near-term. Just a for-instance; if we get through inauguration here, and 'elections' over there in Iraq, without a fiasco of any sorts, the market might be sufficiently relieved to try punches through resistance levels sufficiently to challenge (higher levels). Could it confound conventional technical ideas of subsequent 'negative continuation' patterns resuming, beyond the short-term phenomenon we're experiencing now? Measuring all of this pure-and-simply, would say the S&P works (reserved for ingerletter.com members). However, before getting excited about that, consider that it may occur (reserved). It's also unlikely (barring actual attack) to occur instantly, and shorts will be at real risk, if they increasingly commit to downside postures, in an already oversold daily market.

(Reserved structural discussion.) And the entire market has not been a 'single wave' this year by the way. It's corrective in nature; a fairly heavy hit for a January, than we have seen in recent years, but isn't predictive for the year as a whole, in our thinking (we could be wrong, but we'll evaluate as it all evolves). In this regard we still think it's exogenous 'event risk', not really financial developments, or conditions of American business, that's at the heart of these psychological concerns, and we suspect that today's response to the 'stealth threat news' amplifies that worry (near a low-point?).

MarketCasts (intraday audio-emails) were right on-the-money about Tuesday's rally, and interestingly had too optimistic a bias on Wednesday, but not at a cost, since the guidelines bottom-fished a couple times, so that breakevens were obtained on longs, in theory, while a sharp gain on a short-sale was actually doable in the last hour. For those who wonder why we were willing to let it take us short then, the reason related to the developing story out of Boston, which we hadn't had time to comprehend fully, or try to dissect, but realized the marketplace might see bids pulled in the face of that.

Also, particularly for the NDX, when you view it longer-term (last 2 years), the pattern of corrective action was not a big deal; looking to be nothing abnormal that we see. It is debatable whether (more) retests may be able to penetrate recent or forthcoming lows, as very much may depend upon exogenous events (or lack of them). Yes, risks of 'expanded' war into Syria (or even Iran) could trigger worst case fears, but it might also be that a purpose of well-planted 'leaks' on this or similar areas, is to promulgate those fears in Teheran or Damascus, in order that calmer heads might prevail in such countries regarding the export of terrorism, or growing nuclear development threats as Ayatollahs wish to instill increasing regional fears (seeking regional dominance).

What there is not a problem with is Federal Reserve policy (ironically the one area so many are unnecessarily worried about in our view), or the retirement of its Chairman. We do not believe the Government will chose foolishly in replacing Mr. Greenspan, at the same time as there is not a tight monetary policy, just the perception of one in at least some quarters. And we believe those pundits are wrong, and that slightly higher rates are not the same as high rates (which could be a business impediment), and so we think slightly firmer backdrops actually affirm the growth of the Nation's economy.

Concurrently, while closely watching interesting events, risks and assorted domestic issues, we must not shirk from monitoring the world situation as well. Yes, saboteurs, infiltrators, and 5th columnists are still operating in the U.S. and we remain concerned about the implications of al Qaeda messages, which quietly yielded higher alerts, and updated concerns, having seen nothing to ease security concerns in this regard.

In summary . . events continue reminding us of risks Allied fighting forces face, given continued attacks on free peoples, by elements including assorted terrorist groups. A world awakening to terror threats grows as domestic concerns retreat from absorbing us. Though few generally concur (interestingly the Fed does), our view has been slow but persistent American growth isn't negative, as it allows protracted gradual growth without ancillary significant high interest rate pressures (slightly higher over time; but not high). There's not a truly-restrictive monetary policy; nor is there likely to be one employed over time, irrespective of energy-induced inflationary pressures that can't be addressed simply; but (as suspected) are being tempered by simply lower prices.

As to flies in the bullish alternative continuing; in our view, it's realization terror matrix issue continues, with challenges ahead, and as attacks and various difficulties show. Ongoing earthquake temblors continue several times daily across much of the West.

Last week, we thought the market could drop, bounce, dip; and then go higher (the call), and though frustrating at times, it evolved pretty decently, if not comfortably at all points. Tuesday, because maneuvering room is slim given proximity for intraweek trading against a backdrop of an Expiration, we simply thought the market would rise; that occurred then got aborted by Wednesday events (we never thought Wednesday would replicate Tuesday's solid upside move). Thursday we think starts lower, then a bounce; then try to drop even lower a bit; then rebound tentatively, against (stresses).

Gene Inger,
Publisher

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