Morning Report

It looks like we'll see an open higher this am as investors continue to feel that lower interest rates will stay in effect for some time. Macy's reported somewhat good news, but it wasn't enough for the market and the stock sold off. Consumer spending accounts for about 70% of economic activity in the US and spending remains cautious with an unemployment rate officially at 10.2% (we know it's higher considering the number doesn't account for several groups of unemployed people). We'll see again, as I said yesterday what this market can do in terms of follow through. Yesterday was pretty anemic and breadth was non-existent.

On the charts most of the major averages have H&S tops in place, nearly all have some serious negative divergence of one form or another. I haven't seen a single daily 3C chart that wasn't negative, but the daily divergences can take months to work themselves out. I doubt we are looking at months before we see a significant correction as the intraday charts are also packed with negative divergences and this rally has been plagued by falling volume, only rising recently with volatility and down days. As a matter of fact-just look at the volume pattern of the SPY over the last month or so.

More later....