Ben Bernanke yesterday declared that the banks would not be nationalized.FBI funds were cut to stop the investigation of political corruption.

Market Outlook

Irrational fear of risk has depressed markets and prices. The administration ignorance of the relationship between the equities markets and the American economy is profound. The markets lead the economy by at least six months. The more the administration tries to destroy the stock market with socialist code words the more they endanger the American economy. The administration has to become rational before the markets will become rational. The return of rationality in the market will cause a rapid substantial recovery in stock prices in a very short time. The economy will then recover quickly.

The broader American market indices held yesterday supporting the double bottom. The recent stock market behavior could support a major advance if it continues upward this week.

Last night Asian markets were mixed but edged lower ranging from +0.6% to -0.9% with only the city of Shanghai down 3.9%.

At this moment most European markets are up about 1.8% on average.

The broader American indices are still holding above their November lows and the futures indicate a good start for today. There remains 30% to 40% headroom for this American market to rally before hitting substantial upside resistance level. However the 50-day moving average could be a new resistance level limiting the advance to about 15% until the Obama administration becomes rational.

The window for selling out of equities started closing January 20 and is almost shut now. The oversold market condition right now will hold the window open and a continued surge this week could crack the window open further and make continued holding of any equities worth while at least into this next rally. This week is critical. We would wait to sell into the next rally if the rally continues this week.


Administration irrationality caused and continues the crises

The oversold American stock markets rebounded from lows again yesterday and the futures are up significantly today indicating that the market will do better today. Ben Bernacke spoke intelligently like a capitalist yesterday causing the market to recover earlier losses and to go into positive territory.

President Obama later talked again in vapid generalities just like a well meaning empty headed socialist and subsequently drove the market back into negative territory as the market closed. The administration of "social activist czars" hasn't got a clue about what makes an economy grow. They seem preoccupied with acquiring more power not the needs of the American people. One of their most revealing quotes is, "Never waste a good crisis." They seem to enjoy creating crises and blaming it on others. They have witch hunts going on everywhere against Bush's war on terrorism, persecution of terrorists at the Cuban Club, against Christians for the socialist's definition of hate speech as anything spoken against immorality, and against radio show free speech for their criticism of socialism and totalitarian power grabs. They are against intelligent working Americans who object to taxation to pay for hoodlum Acorn political hacks, illegal aliens, and the slackers who want socialism and a free ride. The administration cut the FBI funds from the stimulation package to stop the investigation of political corruption.

Last year the Obama campaign ignored the fact that no responsible Americans have used the term "depression" since FDR said, "The only thing we have to fear is fear itself." Obama won the election at the price of creating the fear that caused the current crisis. This continued administration irrationality causes irrational fear depressing equities markets and the American economy. Unless Obama becomes rational he will cause another Great Depression out of the crisis he caused during his campaign.

Bernanke (from the Bush administration) said yesterday that stock market ignoring fundamentals.

Federal Reserve Chairman Ben Bernanke said on Wednesday that recent sharp declines in stock prices mostly reflected investor attitudes about risk and had become detached from real U.S. economic fundamentals.

"The stock values reflect not so much the fundamentals, the long-term profitability of the economy, but they also reflect investor attitudes about risk and uncertainty which right now are at very high levels."

Bernanke said that while the stock market was one of the important financial indicators, other key variables like credit markets were painting a different picture.
"It does reflect the profit expectations of a large number of firms, therefore it is closely tied to expectations about the economy," he said, referring to stocks.

Bernanke attributed the rapid and sharp decline in stock prices to investors being "skittish about holding any risky assets under the recent administration hints such as socialist nationalism and (who) have moved in a very substantial way toward the safest assets like Treasuries. Bernanke declared that the banks would not be nationalized.