SP Futures Hourly Chart at 10:45 AM

The dynamic on the chart is the short term potential double bottom "W" and the developing intermediate H&S distribution top.

A pullback of 4% with a move to a higher high is supportive of the 'new bull market' scenario and we would expect the media cheerleaders and paid market strategists to hit the pom poms hard if the Street can make this happen.

Volumes are light enough. But we also sense a growing cynicism and distrust of the US financial markets in traders and investors. There is a recognition that the game is rigged, and the 'house' is skimming a larger piece of the daily liquidity thanks to government money and new technology.

This 'skim' may destroy a game while enriching the house, as all seasoned casino operators know. It is not clear to us that the Wall Street crowd can practice this sort of longer term restraint.

The Chief Economists

But do they care?

China Makes Biggest Cut in US Treasury Assets Since 2000

China dumps US Treasuries the most aggressively in a decade. Now THAT's a change you can believe in.

One has to wonder how long the UK, Japan and the US can keep supporting each other's crony capitalist oligopolies.

China Daily
China cuts US Treasury holdings in June
2009-08-18

NEW YORK: China reduced its holdings of US Treasury debt in June by the biggest margin in nearly nine years, according to a US Treasury Department report issued on Monday.

China cut its net holdings by 3.1 percent to $776.4 billion in June from $801.5 billion in May, the report says. This is also the first large-scale reduction of US Treasury debt by China so far this year.

However, its June holdings were still larger than April's $763.5 billion and $767.9 billion in March, according to the statistics of the Treasury Department.

Reuters data show the drop in China's Treasury holdings in June was the biggest percentage reduction since a 4.2 percent cut in October 2000.

On the other hand, Japan, the second-largest holder of US Treasury securities, increased its holdings to $711.8 billion in June from $677.2 billion in May.

The United Kingdom, the third largest holder, also increased its holdings to $214 billion in June from $163.8 billion, a surge of 30.6 percent.

SP Futures Hourly Chart at 1 PM

The US equity markets have bounced back to key resistance on a much great than expected drawdown in oil inventories.

The trade today seems very technical (ie short squeeze by the 100 million dollar men) and lacking in conviction.

Let's see how the markets deal with this and then trade accordingly. Volumes remain light, and may do so until September. However, if anything 'happens' this market may flop as convincingly as Obama's "change" platform.