Pessimism spin prevails as Funds shift to a long position and need more sellers.

Again retail sales are reported in a way to spin a negative psychology of the markets.

"The U.S. Commerce Department said total retail sales fell 2.7 percent to a seasonally adjusted $343.2 billion last month following a revised 2.1 percent drop in November.
December's drop was the biggest since October last year when sales fell 3.4 percent."

Remember sales did indeed drop 3.4% in October.2008 relative to October 2007. In fact sales fell off a cliff back in August 2008. Well if we remained off that cliff we would have 3.1%, 3.4%, 4%, 4.5%… down more every month since August 2008 because the decline is a year to year measure… and sales were increasing every month in 2007 and 2008 (on a year to year basis) until August 2008. So a real fixed % drop in sales would yield a bigger decline each month not because it was decreasing in 2008 but because the sales base that is used was increasing each month in 2007.

Also they say "revised November 2008 sales" and leave out the fact that the original November sales decline estimate was pessimistic just as the December decline estimate is probably too pessimistic.

Still the stock markets are resisting pressure. China will lead the recovery and they were up 3.5% last night. Europe will lag the recovery and they are down an average of about 3% at the moment.

Next week the rally could be spectacular. But the moment it surges we may have selling opportunities to catch the overshoot that will occur.