Is it kiss and makeup time?

This is getting more and more like Kramer vs Kramer – the plot bears an uncanny resemblance to what is going on with White House vs Congress (The 1979 film tells the story of a married couple’s divorce and its impact on everyone involved, including the couple’s young son.).

And with the expensive lawyers involved, the battle over custody of the nation’s finances,  the young son, in the guise of the public, is caught in the middle of this bitter row.

This battle is dragging on and on and just maybe everyone will be needing the Obamacare before it’s all over.

This morning, we have a small bounce in shares, likely more a relief that the sides cannot get farther apart than they already are than any new-found desire to take on risk.

And talking of risk – I am seeing signs of liquidity drying up already, and there hasn’t been any default yet.  There is real concern about money market funds – and one-month T-Bill yields have spiked up sharply.  And now China is bellyaching about the default possibility – they own huge piles of Treasuries.

This could get real nasty and spiral out of control as financial nerves are on edge anyway.  Sentiment is already turning from full-on bullish.

The elephant in the room is about to make itself heard.

The EWs in the Dow are a little clearer now that a new low the the move was made yesterday afternoon – a low under the significant late August/early September lows.  Either we are in w1 down or there is one more rally taking Dow to new highs.  I cannot rule that out.

USD/JY

Is nicely on track.  A few days ago, I believed the market was in the late stages of a big w4 down and about to embark on a big w5 up

My first major target is the 100 area.  Note the lovely contracting triangle at the top.  This is typical of markets that are girding their loins ready for a big sharp move.

We have something similar in the FTSE, where I likened the action to that of a coiled spring.