JANUARY 13, 2205

A couple of days ago I said this market looked like it was in trouble, and today proved it. When oil broke through Monday's high around $47, I thought that would be the straw that broke the camel's back. However, the market just laid there until the last hour. Most of the internals now look awful. Market breadth is crumbling. It looks like January will be a down month. NASDAQ broke its December low. As I said before I think a lot of longs are trapped above, as it was a sharp and quick rally to end the year.

We are back to another pattern as well. The bond market takes higher oil as economy slowing and rallies, rather than fear the inflationary aspects of higher oil prices.

The dollar did not feel the knock-on effects of the lower rates and weaken like it has in the past. Perhaps because it got hit so hard yesterday, but also because the economy is getting very soft over there. Trichet, the ECB president said today inflation was moderating and consequently a rate hike is off the table. They left their rates unchanged as expected.

Over the years one of the most bullish and supportive stock market factors, has always been low long interest rates. Much more important that short rates. Get inflation under control so we can have lower long rates was always the mantra. Now we have them and we have these low long rates supporting stocks but these high oil prices are hurting stocks. The high oil prices are helping lower long rates. Did you see how well the interest sensitive homebuilders did today. Round and round we go.

This is my last post until Tuesday. Going to get out of this icebox and get some sun.