Obviously the most important things to watch this week are the central banks, as they reveal whether the economic situation is desperate enough for them to print enough money to set off a flight from cash into assets, and thereby spark off another leg of the bull run in equities. It really is a funny old world nowadays.
The most important decision should be made tomorrow, and that is when a German court will rule on whether the proposed ECB play to print money to buy EU sovereign bonds is illegal under German law. I hear that Morgan Stanley is suggesting 40% odds that it will be ruled illegal. I'm surprised the odds are as low as that. If the German court backs the plan then European QE is on, which would look bullish. If they don't the prospects for the the Euro and equities will look grim.
The second decision should be announced on Thursday by the Fed, and that is whether there will be a QE3 in the US. It's hard to think of a good reason why the Fed would implement QE3 at this stage, unless Bernanke is trying to influence the election, but there seems to be a very strong expectation that QE3 will be announced then, so we'll see.
Meanwhile SPX is just under very key support and if it breaks up this week that will most likely kill off any chance of a significant top until 2013.
On the daily chart SPX closed back just under the upper bollinger band. It would be unusual for it to break back much above the upper band, and upside should be limited today. If we see another push down below the overnight low then support at the middle bollinger band / 20DMA is at 1412:
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