StreetSmartPost

Saturday, February 6th, 2010. 9:30 am.

I worry about the extreme political polarization in the U.S. that has the country so divided that we are rapidly becoming a nation of political enemies, civilized enemies but enemies nonetheless. The divide is becoming as serious as the divisions between warring religious factions in Iraq, or bitter divisions in other deeply troubled countries, where citizens are so focused on their differences, usually political or religious, sometimes both, that they cannot get anything done in any area of their country’s future that requires cooperation or compromise between those of different persuasions.

Is it only under the threat of military disasters that we can become one nation, all just Americans, with one goal? Can we not also do so under the threat of economic ruin? Apparently not.

I worry about that, with so many very critical decisions to be made in coming months, regarding for instance; when, if, and how to begin removing the government stimulus efforts (which were initiated by both political parties during their Administrations); how to handle the massive deficits; the growing economic dominance of China; and on and on.

The best decisions will not come out of bitter fighting, with the goal being who will come out ahead in the next election, which seems to currently be driving the efforts of both sides, but will come out of putting the best minds together from both sides toward an entirely different goal, what’s best for the whole country.

I worry, because I don’t see that as likely.

But it is not just the politicians who are to blame. They are heavily influenced by the bitter polarization of the people they represent.

Yesterday in the U.S. stock market.

A few weeks ago I warned that volatility was due to return after having been absent for several calming months during which the Dow was trading only 75 points or so between its intraday high and low, and usually closing in the middle of the range.

Over the last three weeks it’s been trading in an intraday range of 150 to 250 points, and frequently closing at the low of the day.

Yesterday saw similar volatility, with the Dow trading in a range of 200 points, down as much as 170 points late in the day, breaking it through two psychological support levels, 10,000 and 9,900, to a low of 9,835, which had traders sweating and fearing a collapse. But buy programs flooded in beginning at 2 o’clock, to recover it to a fractionally positive close for the weekend.

Volume picked up to almost 1.6 billion shares traded on the NYSE in the volatility.

Yesterday’s intraday chart:

The Dow closed up 10 points, or 0.1%. The S&P 500 closed up 0.3%. The NYSE Composite closed down 0.1%. The Nasdaq closed up 0.7%. The Russell 2000 closed up 0.5%%. The DJ Transportation Avg. closed up 0.2%.

Global markets for the week.

Again this week, not much green anywhere. And once again global markets were more negative than the U.S. market.

If you’d like to see a three-month chart of any or all of the above indexes click here, and then click on any of the markets in the similar list at the left side of the page it takes you to.

What’s next for the market?

Next week there will be very few potential market-moving economic reports. To see the full schedule of next week’s reports click here, and look at the left side of the page it takes you to.

And the 4th quarter earnings reporting period will be winding down.

That will leave the market trading primarily on its new worries of potential debt crisis in global economies, in various government owned sovereign wealth funds, emerging markets, the time table for removing stimulus efforts, economic growth for the rest of the year, etc. That should be enough fodder to create continued up and down volatility.

Stock Market Patterns.

The next weekly pattern is that next week is the week before this month’s options expirations, and the week before tends to be negative. However, with the market so short-term oversold that is in question. (see chart of the morning below).

Interesting Charts of the Morning.

The market was made short-term oversold beneath its 21-day m.a. by the previous severe two week plunge to a degree that normally brings at least a short-term oversold rally back up to the m.a. And the market did attempt to do that.

But this week the rally attempt failed before it even reached the potential resistance at the m.a.  Yesterday was particularly worrisome to traders as the Dow’s additional plunge of 170 points in the first half of the day from an already very oversold level had it take on the appearance of a potential collapse. If it closed down like that in front of the weekend it may have brought panic selling on Monday and Tuesday when investors got home and had time to look at their charts and portfolios.

But the extreme oversold condition had short-sellers taking profits at least temporarily, and buy programs coming in from the big program-trading firms.

That rescued the market, at least for the day. And left it still quite oversold short-term beneath its 21-day m.a. This a bar chart. So the lowest point on the chart is the low for the day yesterday. We’ve marked the close with a short line to make it more clear.

Please scroll down to see other recent ‘Interesting Charts of the Morning’ and commentary.

To read my weekend newspaper column ‘Can Corrections Be Better Than Rallies?’ click here!

I’ll be back
Monday a.m. after a look at events over the weekend, Asian markets Sunday night, and early morning indicators for Monday.

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