The Nasdaq 100 registered an inside pattern following yesterday’s action, and there is a possible double top pattern evolving as the current level is almost exactly the multi-year high achieved in November 2007.

Yields across the UST spectrum are maintaining their upward momentum and have had the effect of pushing mortgage rates in the US back above 5%, which may be just one of the unintended consequences of QE2.

While Clive Corcoran is still expecting higher equity prices ahead in 2011 - until and unless the EZ disintegrates - the near-term risks of a sharp correction are rising and to that extent he remains flat on exposure to US equities.

A near-term top for both the Russell 2000 and the S&P 500 is increasingly probable.

US equities are showing remarkable resilience, but traders need to remember that current equity markets in the US are less about price discovery and more about the benefits of POMO.

At some point the Fed may not be able to maintain its current facade of being the buyer of last resort for the mountains of public sector debt. Then institutional holders will have to make a choice - either hold the bonds until maturity on the self-deceptive belief that they represent solid assets with predictable cash flow or rush for the exits in a collective panic which might have some rather unsavory characteristics.

CMF, which is an ETF which provides an opportunity to take a view on the municipal debt for California, is not very liquid but its behavior provides a vehicle for those with a bearish view on the fiscal condition of one of the US’s most troubled states.

The weak NFP data on Friday was interpreted by many market participants as good for equities as it should prolong and enhance the Fed program of Quantitative Easing.

More and more we have markets that go up primarily because of short covering by over-zealous bears who get too confidently pessimistic during the RISK OFF phase of the game, and go down when the hedge funds enjoying the RISK ON phase get too enthusiastic.

There is a more positive tone towards the euro this morning in European trading, although short covering is surely a factor given the severe declines in November.