If the support shown on the S&P 500 near to the pivotal 875 level yesterday is to translate into another leg up for the broad market, the Russell 2000 will need to demonstrate renewed leadership.







The euro is firmly entrenched within a narrow channel between $1.38 and $1.44 and in the intermediate I will be watching for the possibility of another failed rally to move back towards the mid-December levels.



The FTSE is trying to rally in Thursday’s European session, but as the Ichimoku chart below suggests, the UK index is at a technically critical level.



XLF is continuing to drop through the green cloud and the volume is tending to pick up on the downward moves.



FXB, which allows access to sterling against the dollar via an exchange traded fund, is stalling at the 38% retracement level of the long-term swing high and low seen on the chart below. Recent price action is suggesting that this barrier may be hard to penetrate.

As background to the current dire state of the UK’s public finances, the following from Bloomberg states the concern about gilts succinctly.

The U.K.’s growing budget deficit and the central bank’s reluctance to say when and by how much it will expand so-called quantitative easing are keeping Pacific Investment Management Co., which runs the world’s biggest bond fund, and BlackRock Inc. from increasing their holdings of the securities.

Guessing which gilts the central bank is going to buy is like “playing Russian roulette,” said Philip Laing, the Edinburgh-based director of government bonds at Standard Life Investments, which has about 118 billion pounds ($191 billion) under management. “While they’ll probably extend it, we are focused on the end of quantitative easing.”

Investors are losing confidence in Prime Minister Gordon Brown’s economy as the government embarks on the biggest fund-raising effort in Britain’s history. The Treasury plans to sell a record 220 billion pounds of gilts this fiscal year to fund bank rescues and stimulus programs designed to pull the economy out of its deepest slump since World War II.



California Pizza Kitchen (CPKI) surged above all three moving averages on twice the average daily volume.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.