The Christmas Season is upon us. It is a season of hope and light.

World Outlook
According to a central bank survey of about 100 economists published yesterday, Brazil’s economy will contract 0.26 percent this year compared with a previous estimate for 0.21 percent growth. But then Brazil’s retail sales jumped in October twice as fast as forecast by economists as surging consumer demand drove the recovery of Latin America’s biggest economy. However B of A today said Brazil’s central bank will keep the benchmark interest rate at a record low through 2010 because concerns that inflation will accelerate are “exaggerated,” according to Bank of America Corp. Tenengauzer reportedly said,

“This desperation about inflation in Brazil is exaggerated.” “The central bank won’t need to raise rates until 2011. If they do, it’s going to be just a little.”

Brazils inflation is already 4.3% during the recession when deflation is usually a problem.

Market Outlook:
The U.S. and the world remain near the top of the biggest stock market bubble since the 1930s. Yesterday was the best market day in some time with money flowing back into stocks. The respiral indicator (modified parabolic SAR) turned positive again and the modified MACD indicator became somewhat less bearish. The MCF (Market Cash Flow) index improved somewhat but still gives a sell signal and the volume adjusted NYSE index is still about ready to show its second shoulder sell signal. Some people would wait until the neckline breakdown (of the head and shoulders formation) occurs to confirm the head and shoulders sell signal. It is now less likely that the market will correct before Christmas rather than in January as we have been expecting. The NYSE is now only 2.1% below the required sustainable cyclical bull market's head level and thus is still a declining shoulder.

This Week
Demand for the weekly 3- and 6-month bill auctions continues to be very strong. Despite very large auction sizes, coverage for both auctions was over 3.60. Low bid for the 3-month bill was once again zero. The average rate was at the low rate of 0.4%. The dollar regained strength causing commodity prices to decline and stock averages to decline around the world.

Tuesday, Dec. 15:
Prod. Price Index
NY State Mfg. Index
Industrial Production
Housing Market Index

Wednesday, Dec. 16:
Consumer Price Index
New home starts
FOMC anncmnt

Thursday, Dec. 17:
Unemply Claims
Leading Econ Index
Phila Fed Index

Friday, Dec. 18:
Quadruple-witching expirations.

Market forces December 14
We estimate the NYSE must still rise 2.1% from yesterday's close to be interpreted as a continuing rally not a declining head and shoulder sell signal. That reflects both the price change and volume of shares being traded. The market still looks like it is topping out. In any event after a possible year end rally a normal -3% to -5% downward correction would be due anyway… so it is still wise to take profits were possible. If the head and shoulders sell signal occurs the correction could be closer to -10% to -25%.

Asian markets were down over night; China down -0.9%, Hong Kong down -1.2%, India down -1.3%, and Japan down -0.2%.

European markets are down with the average in a range from -0.2% to -0.8% this morning about half way through their day.

US pre-market futures down by about -0.3% today at 8:00 AM EST.

It is important to be able to take stock profits soon if the broader market of the NYSE does not set a new high at least 3% above yesterday's closing price and on above average volume. Continuation with the current market bubble looks like it now will be a bumpy lateral ride. It is more likely now that this first decline will not exceed 10% but the downside risk could be as great as 25% now given the mess national socialists are creating.