... The S& P 500 index suffered a steep declines 30.53, or 1.98 percent, to 1,511.04, and within striking distance of interim support at 1510. A failure to hold 1490 would create a major sell alert. Declining issues outnumbered advancers by nearly 10 to 1 on the New York Stock Exchange, as consolidated volume came to a heavy 4.06 billion shares, compared with 3.09 billion shares on Monday. Profit-taking was the flavor of the day. Yesterday's decline maintained a pattern of back-and-forth finishes. For the sixth straight session, the market has risen one day and fallen the next. Apparently, the market doesn't know what it wants. ... Stepping aside from the noise for whatever happens, the stock market will react to second half of the year company earnings reports regardless that the pundits say. Indeed, the steady flow of lackluster earnings reports has made the market more skittish that a cat on a hot tin roof. ... When Countrywide Financial posted sharply lower second-quarter profit and slashed its earnings forecast, its shares declined $3.56, or 10.5 percent, to $30.50. That was enough to trip the bulls. Thus, the largest U.S. mortgage lender instantly became the manometer of the housing industry, which has continued to slump amid delinquencies and defaults in subprime loans.The problems with subprime mortgage lenders have periodically rattled Wall Street this year, leading to sudden plunges as investors feared that the sector's problems would spread to other parts of the economy. The market has generally recovered in a short period of time, yet it remains vulnerable to any bad news about mortgages, personal credit and housing. ... The dollar dropped to a new all-time low against the euro and a 26-years against the British pound on fears that the troubled housing market will damage the broader U.S. economy. The U.S. Index, which tracks the dollar against a basket of the world's major currencies, tumbled to a fresh 15-year low at 80.015. Additionally, interest-rate differentials has moved against the dollar, as the Fed keeps its target rate on hold (5.25%) as other major central banks are tightening. Troubling is the rally in the yen against high-yielding currencies, including the euro, the pound, the Australian dollar and the New Zealand dollar, as steep losses in U.S. stocks prompted an unwinding of carry trades, in which investors borrow funds in low-yielding currencies and reinvest in higher-return currencies and assets elsewhere. Wholesale liquidation of U.S. securities would create an international domino affect to contract investment solvency, and foster repercussions of a fallout extending beyond the U.S. ... Short interest on the Nasdaq rose 1.8 percent in the July reporting period, signaling a rise in bearish sentiment even as the stock market was hitting record levels. As of mid-July, the number of short-selling positions rose to 9.34 billion shares from 9.17 billion shares in the previous month.The Nasdaq's short ratio, or the average number of days it would take to cover the outstanding short positions, rose to 4.5 days, from 4.35 days in June. Investors who sell securities "short" profit from betting stocks will fall. Short-sellers borrow shares and then sell them, waiting for the stock to fall so they can buy the shares back at the lower price, return them to the lender and pocket the difference .Short interest in the stock market is often a gauge of the level of skepticism among investors, with rising short interest signaling more skeptics. July was the fifth straight month of increases in the exchange's overall short interest positions, but the pace of the increases has started to slow in the last few months. Short sellers came back into the market after a sharp fall in stocks in February but have continued building positions even as the Dow Jones Industrial Average hit 14,000. The trend suggests a downward phase in market direction.

... July 24, 2007, 3:42pm ... S&P 500 index dropped below 1510 to establish primary indicator that a further correction is likely. 1490 is critical support. If S&P falls below that number consider increasing cash position to 60% - reduce laggards, and questionable holdings.

... 7:30 ...Yesterday's run up from Friday's retrenchment demonstrates market resiliency, yet the consensus is raising questions of whether the short-lived nature of this year's collective pullbacks suggested that stocks has not prepared a sufficient base to move higher. Totally bunk! At 1,541.56 the S&P 500 index 7.46 had clearly kept the trading range of 1520 to 1590 in view. A test of 1520 must wait for another day. Indeed, the resumption of the market's rise absent any major economic news had temporarily quieted concerns about questionable subprime loans. So what's the deal? Global growth continues to accelerate, cheap U.S. dollars makes exports competitive and U.S. stocks still at cut-rates. ... Acquisition activity reflects our position that liquidity is the primary factor to drive the market higher as private equity, corporate cash and international investors like U.S. stocks. ... Remain positive, while participating in both sides of the market.

July 23, 2007, 7:30am ... The S&P 500 index closed 1,534.10 18.98 (1.22%) and finished the last week off 1.2%. A probable secondary test at 1520 is likely this week. . A further decline will trigger a major sell signal if the S&P fall below 1490. For now, be prudent, allow the dust to settle and work the edges on both sides. ... .Pundits blamed disappointing earnings from Google Inc. (GOOG) and Caterpillar Inc. (CAT), while credit concerns supplied its negative magic on financials. Take GOOG and CAT out of the equation, and focus on the credit markets worldwide, which sold off big time as government bonds became the flavor of the day. On Friday, JP Morgan said that problems associated with subprime will get worse as S&P downgraded a number of European collateralized debt obligations. Financial shares eased lower when Federal Reserve Chairman Ben Bernanke warned of $100 billion in losses from subprime mortgage defaults. Can the era of risk-free lending be coming to an end from meltdown in the U.S. subprime mortgage market? ... No! 40% of S&P revenues is generated overseas, large multinational companies are the true power and liquidity behind a higher stock market. ... China's central bank on Friday hiked interest rates by 0.27%, partly as a result of second quarter growth of 11.9%. World growth is merely 30% into the cycle.

. .. . Purpose of the arrows: - projecting that DJIA, Nasdaq and S&P barometers will close higher at the end of the day. - projected consolidating barometers with limited directional action. - projecting all three barometers declining for the days.