Economic Stimulus is Not a Silver Bullet

5/5 - "...although we have now broken above the problematic resistance level of 1400, there are several reasons to reign in any rampant bullishness in the short term.

Among them, sentiment as well as the High/Low Indicator that I’ve mentioned before a few times. It measures and compares the number of highs to lows in the S&P 500 index. It is a ratio of the highs to the sum of the highs and lows."

"This year has already brought two crazy oversold situations in the market. The first in January and the second, mid-March...Clearly the extraordinary situation in early 2008 has been resolved and the S&P 500 has bounced back - around +10%. And even if the High Low Index did get red-lined, it is no guarantee that the S&P 500 will top out instantly.

But the important thing I take from this metric is that we no longer have that deep oversold condition from which to catapult higher. Been there, done that. The easy money has been made in that trade. Now the longs have to keep their wits about them."

5/9 - "After a period of volatility such as we had during the first quarter of 2008, it is understandable that traders expect moves to extend. In a range market, however, reversals of market moves are the order of the day....Here are several cues I rely upon in gauging a possible range day."

"1) Other, related markets are range bound...2) Little news...3) Decreased volume...4) Narrow breadth...5) Sector rotation...6) Initial trades don't work"

"The main thing is to not overtrade these narrow days. If a market is trading in a range, the best trades are to fade moves around the range extremes."

5/8 - "As shown, after breaking just above its longer-term downtrend, the S&P 500 has stalled at resistance even though it remains slightly overbought. The next level of support for the index is at the 1,380 level.

On a sector basis, most of them have moved back into neutral territory after trading overbought for a week or so. Short-term uptrends remain, but we'll need to see support hold soon if they are to stay intact. Energy, Materials, Telecom and Technology are still slightly overbought, with Energy and Materials at or close to their 52-week highs."

5/8 - "The so-called "dollar rally" is illogical, irrational and is unfolding at precisely the wrong moment - which means that many investors who are long on the dollar could get a nasty surprise if they don’t temper their enthusiasm a bit in the months to come.

Granted, there are a lot of things that happen at the wrong time when it comes to the financial markets. But the prospect of watching the dollar rise at the same time that oil and gold are advancing (a scenario that we don’t have right now, given gold’s retreat, but one that I won’t be surprised to see, given current conditions) is downright disconcerting - if for no other reason than the history books show a pronounced negative correlation over time between these assets.

Couple that concern with the reality that the Bush Administration’s policy for the dollar has been one of benign neglect and you can come to only one conclusion: Absent an increase in interest rates by the U.S. Federal Reserve, any increase in the value of the dollar must be viewed as an anomaly.

And anomalies merit scrutiny.

One possible set of answers comes from an unusual source - the London Interbank Offer Rate [LIBOR] system of setting interest rates."