I don't want to get overly excited to be a bull here, but for the time being, I think yesterday could be a key swing low.

The market lost ground again last week. Despite early optimism from Europe and a rise in bank stocks, the bulls could not muster any meaningful rally. And the bears quickly resumed the selling pressure, defended 1175 on SPX, and dragged the market back to within 3% of this year's low.

Volume was also high in the decline, which indicates that there still is a large base of investors who are more than willing to sell at lower prices.

The market blasted higher yesterday and the bulls recovered a lot of lost ground. The volume yesterday wasn't all that strong, but the bulls were able to overcome resistance zones. SPX blasted 3% higher, which put it way past 1175 and took the index all the way up to 1197 resistance.

Now that 1175 has been reclaimed that area needs to be support. I didn't like that SPX went below the 1175 level on Tuesday, but it recovered fast enough to give the bulls a second chance at 1250.

Paper money system default appears at first glance to be an unhappy accident of progressive governments biting off more debt than they can chew.

And while there’s certainly plenty of blame to go around for progressives, conservatives, RINOs, DINOs and moderates alike – if you take notice of who benefits from the devaluation of paper currencies, you arrive at a different conclusion.

You’d think that progressive candidates would spend money in an effort to end poverty. That would get them elected for life by the formerly impoverished.

Similarly, you’d expect the end-goal for hawkish conservative legislators would be world peace. Nothing would be a bigger victory for the world’s greatest military.

But despite decades of entitlement programs at home and billions of dollars spent annually on intermittently bombing and paying our enemies into submission abroad – we still have more poor people in this country than we know what to do with, and our list of enemies only grows longer every year, not shorter.

So if these programs have failed, then who or what is the real beneficiary of inflationary policy-cum-deficit spending?

The U.S. dollar and Treasury bonds are weaker today after the Group of 8 said the global economy was growing and the perception of Greek debt problems improved.

 

As we know, a weaker dollar sets the stage for higher stock and commodity prices. Oil is perhaps the best indicator of economic growth expectations. And its inverse correlation to the U.S. dollar is also airtight. So much so, that if you see oil rally, bullish economic commentary is usually not far behind.

The market continued its sideways move yesterday and banged-up against 1335 resistance for most of the session. Over the past four sessions the market has been stuck in a four point range and trading

We're in the home stretch of 2010. The favorite, Weak Recovery, is ahead by a nose. QE2 and Falling Dollar are right behind. Toxic Asset and Solid Earnings have been unable to mount a charge.

But two horses -- Man 'o Trade War and Europe's Problem -- are moving on the outside and could decide the race.

There are so many conflicting catalysts, sometimes it seems as though you have to pick your horse, place your bet and see what happens.

On Monday, when it was apparent that we were in for a big day as futures went limit up in pre-market, I said I wanted to see a candlestick pattern called “three white soldiers.”  

 

Three white soldiers basically means three pretty good sized up days in a row. This pattern is considered very bullish, especially after a period of consolidation. And the reason it’s bullish is fairly easy to deduce. 

 

A period of consolidation for a stock means that not much is changing. The buyers and sellers are pretty much in agreement as to what it’s worth. And so the price doesn’t change much. 

Investing in gold is often called a “fear trade.” In times of crisis, it’s believed that gold will hold its value, and even rise, while the value of paper currencies and other assets fall.  

 

If you bought SPDR Gold ETF (NYSE:GLD), which seeks to track the price of physical gold, 2 years ago, you’d be up around 36%.   

 

The S&P 500 is down around 15% during that time.   

 

You probably already know that gold hit a new all-time high yesterday at $1,200 an ounce. And even though other traditional measures of fear – like the volatility index (VIX), bonds and even stocks – didn’t move much today, the move in gold can’t be ignored.