But last night the penny dropped, albeit in the form of disappointment over the automakers bailout. That in itself may prove to be unsuccessful even if it passes the senate eventually. The Whitehouse is now looking to use some of the bailout loot reserved for the banks instead. Either way it’s messy and the outcome will be highly uncertain at best, a waste of money from the outside at worst.

The Dow came out of it’s benign hibernation to finish down 200pts. It’s also poised for a triple digit decline today, although just how bad may be tempered by the news that retail sales came in not as bad as expected. Barring a high profile pre-Xmas bankruptcy, I’m looking to find support around 8,200 or if a bankruptcy occurs, somewhere around the mid to upper 7,000 (ie no lower low for the time being).

There’s an awful lot of money on the sidelines that needs a new direction for 2009, recession or not. As much as I hate the term ‘window dressing’, it’s very difficult to ignore basic market concepts such as this, especially seeing as the market has been showing all the signs of finding a range it is comfortable with since the end of the November carnage, at least for now. Then we can worry about what 2009 has in store.

 After the Dow hit another lower low a couple of weeks back the following question occured to me – what level would be seen as the beginnings of the long equity-led road to recovery?  Closer inspection of the current toing and froing shows quite uniform reaction to support and resistance levels.  The 1st bear market rally died at 9,400 resistance.  This week ended with the market breaching the 8,600 level.  A move above 9,000 next week would surely mean a worthwhile bet on a move towards 9,400. 

The reaction to consumer data next week should be followed closely; a sanguine reaction to the surely inevitable bad news will be taken as a sign the market thinks it has priced in the slowdown, over the Christmas period at least.  A negative turn and it’s back on the look out for a lower low, most likely.

 It’s reassuring that others are thinking & looking at same.