Once again it was the Fisher show, reiterating inflation concerns.  On Tuesday the market was holding up just fine until the one man wrecking crew appeared to spoil the party.  Today, he returned to take care of the few stragglers that remained.  "Hey, be sure to turn off the lights.. oh, and don’t let the door hit you in the ass on the way out.  Party’s over Bulls, party’s over." 

This exerpt taken from the Dallas Morning News:
http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-fisher_05bus.ART.State.Edition2.
1395847e.html

Dallas Federal Reserve Bank President Richard W. Fisher says record energy prices have pushed inflation to the top end of central bankers’ tolerance zone.

"We now face higher energy prices and businesses’ desire to pass the increased costs on to their customers," he said, and inflation shows little inclination to go in the other direction.

The irony is that the main culprit of higher inflation, surging oil prices, have plummeted in the last couple of days, but the market has failed to respond.  Although,… I suppose it isn’t too surprising considering that the Fed seems hell-bent on ratcheting up rates.  The million dollar question is at what price of oil is there no longer a risk of it leading to higher inflation and how does the Fed implement effective monetary policy in conjuction with oil prices, with which it has no control?  Additionally, to what extent will the government ease supply concerns in order to keep the inflationary pressures of oil at bay?

I’m no economist and certainly don’t play one on TV, but it seems the Fed needs to ease up and let its 11 consecutive rate hikes take affect.  Now that oil has had its hurricane fear induced run up, lets see where it settles out and how infllation responds.  We need to get out of this cycle of extremes beginning with the internet bubble of ’99 and HOPEFULLY not ending with a housing crash in the future.  Practice patience Fed, practice patience. 

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Both the Dow and S&P are in serious trouble with little in the way of support between here and Dow 10,000 and S&P 1150.  After yesterday’s bit of capitulation in the final minutes of trading we may see a bounce from here up to resistance, but getting back above resistance any time soon looks like an impossibility.  Those charts are ugly, REAL ugly.  If there is any bright spot at all, its that the Nasdaq, the S&P600 and the Russell 2000 all have support of their 200 day moving averages.

I’ll take a look at the charts this weekend in detail.