The Market
    
    Technical

    The Averages (DJIA 10866, S&P 1165) continued their decline, with the S&P joining the DJIA below the lower boundary of its up trend off the March 2009 low (10980, 1174).  More time and distance is needed before confirming the break, but I am not hopeful.  The main reason is that stocks will usually rally reflexively following a big down day like Tuesday; however, yesterday prices just kept on falling.  Some took comfort that stocks bounced strongly off their intra day low.  Good for them.  Stocks just broke below a 14 month up trend.  Yes, our time and distance discipline keeps us from assuming a break after one day; but the fact that the up trend was broken and the S&P (DJIA) closed 9 (114) points below that trend line instead of 17 (166) points, gives me little comfort.

    Volume declined; breadth rallied surprisingly; the dollar increased again and remains in its up trend (scoreboard: stocks down, gold up, oil down); the VIX rose again and continues in a trading range.  Our internal indicator weakened again; however, 53% of our stocks remain in their March 2009 to present up trend.

    Bottom line: both indices have broken their up trends off the March low.  However, our time and distance discipline suggest caution before altering investment strategy based on that occurrence.  Nevertheless, a couple of our stocks have broken not only their up trend but the next support level.  Our Portfolios will lighten up on those holdings.

    Here is an interesting chart correlating industrial production with the S&P:
    http://www.businessinsider.com/chart-of-the-day-industrial-production-stock-market-rout-2010-5?utm_source=Triggermail&utm_medium=email&utm_campaign=CS_COTD_050510

    The trend in insider trading hasn’t improved much (chart):
    http://pragcap.com/category/market-indicators

    Some perspective on bull market corrections (short):
    http://tickersense.typepad.com/ticker_sense/2010/05/bull-market-corrections-a-historical-perspective.html

    Here is a much shorter term perspective (short):
    http://www.bespokeinvest.com/thinkbig/2010/5/5/long-in-the-tooth-already.html

    Investors Intelligence sentiment indicator (chart):
    http://www.bespokeinvest.com/thinkbig/2010/5/5/market-declines-as-advisors-go-all-in.html

    Percentage of stocks above their 50 day moving average (chart):
    http://www.bespokeinvest.com/thinkbig/2010/5/5/percentage-of-stocks-above-50-day-moving-averages.html

   Fundamental
      
     Headlines

    Video replay of rioting Greeks filled most of yesterday’s Market hours.  That likely didn’t instill a lot of confidence in investors; hence, a weak start of the day.  As the trading hours wore on increasingly the chatter was focused on the up coming news events: April retail sales announced today, April nonfarm payrolls on Friday, the German parliament vote on Friday on the EU/IMF Greek bail out plan, the upcoming elections in the UK (billed as a referendum on deficit spending) and Germany (billed as a referendum on the Greek bail out) and the meeting of the European Central Bank today (more bail out and interest rate discussions). 

Lost in all of this was the late in the day agreement in the Senate to not allow taxpayer money to be used to bailout banks.  There is more to go before we get a financial regulatory bill; but this is a positive.

    Bottom line: the US economy continues to perform well, though stock prices generally reflect its improvement.  The issue that I am focused on presently is whether  the Greek sovereign debt crisis (1) will get temporarily papered over, (2) spreads to other PIIGS, and/or (3) prompts action from larger economies that will ultimately face Greece’s fate to begin amending their fiscal policies.  How this tragedy plays out will continue to impact stock prices near term and could very well alter our longer term economic outlook.  In the meantime, nothing in the current fundamentals argues for a change in our economic forecast or our Valuation Model.  Hence, continuing price weakness will provide Buying opportunities.

    Thoughts on the above from Larry Kudlow (long):
    http://article.nationalreview.com/433504/a-spend-and-borrow-debt-mess/larry-kudlow

    And more depressing thoughts on the Greek problem (medium):
    http://www.nakedcapitalism.com/2010/05/market-contagion-and-the-dangers-of-devil-take-the-hindmost.html

    And below the surface, the big boys are betting on more than just the demise of Greek finances (short):
    http://www.zerohedge.com/article/cds-traders-verdict-uk-deep-shit-are-france-and-deutschland

    And now for the good news (short, if the links above depress you, then you have to read this):
    http://scottgrannis.blogspot.com/2010/05/silver-lining-to-greek-crisis.html
Economics

   This Week’s Data

    The April Institute for Supply Management’s nonmanufacturing index came in at 55.4 versus expectations of 56.0.
    http://scottgrannis.blogspot.com/2010/05/service-sector-looks-reasonably-healthy.html

    Weekly jobless claims fell 7,000 versus estimates of an 8,000 decline.
    http://www.calculatedriskblog.com/2010/05/weekly-initial-unemployment-claims.html

   Other

    Bill Gross on the rating agencies (medium):
    http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Lovin+Spoonful+-+May+2010+IO.htm

    A reality check for Greek (and US) public service unions (medium):
    http://article.nationalreview.com/433348/the-shock-troops-of-bankruptcy/rich-lowry

    Hopefully, these are an indications of Friday’s jobs report (all short):
    http://mjperry.blogspot.com/2010/05/monster-job-index-april-growth-highest.html
    http://scottgrannis.blogspot.com/2010/05/economy-enters-positive-jobs-territory.html
    http://scottgrannis.blogspot.com/2010/05/corporate-layoffs-are-back-to-normal.html
   
Politics

  Domestic

Al Gore climate change hypocrisy (short):
http://mjperry.blogspot.com/2010/05/al-gores-9-million-ocean-view-villa.html

    And speaking of hypocrites (5 minute video):
    http://www.michaelcovel.com/2010/05/05/congress-more-hypocrites/

  International War Against Radical Islam

    Usually a bit extreme, this Ann Coulter article hits home (medium):
    http://www.anncoulter.com/