The DOW Jones is off over 100 points in intraday trading today. Poor earnings results from General Electrice (GE) and Bank of America (BAC) have led investors to swoon at the markets. This comes despite over 80% of economists reporting that the recession has ended. All the while unemployment and foreclosures are rising. Many companies have reported positive earnings, but the numbers are hard to believe since many companies only turned a profit because they cut their workforce. These came employees will not be able to be the consumers they once were, which in turn will come back to take a bite out of earnings. There are still more writedowns coming. The Bailout has really helped prop up earnings for Q3, but watch out when the fourth quarter numbers come out. The Bailout money will be gone and companies will be on their own. I can’t see compelling reasons to be long the market right now.

The currency market has increased in volatility, because of all this action. The GBP/USD and EUR/USD typically will rise and drop in tandem. Generally a strong up day for one will be a strong upday for the other. On Neutral days they may diverge. But these last two weeks have seen the GBP/USD rise over 200 pips, while the EUR/USD may drop 100 pips the same day. This is very interesting activity and should be monitored.