SHORT TERM: market starts this busy day lower.

Overnight the Asian markets were all lower, with China's volatile SSEC dropping almost 5%. Europe came in 0.20% lower, as our stock index futures were pressured as the trading day began. At 8:30 the Commerce dept. reported Q4 GDP at a higher than expected 3.5%, and 3.4% for 2006 verses 3.2% in 2005. Consumer prices fell 0.8%, the first quarterly decline in 45 years (1961), and the largest drop in 52 years. The Core PCE rose 2.1%, slightly above the FED's 2% comfort zone. The Labor dept. reported employer labor costs rose 0.8% in Q4, and 3.3% in 2006 verses 3.5% in 2005. What all this means is that growth continues at a good pace, inflation is in check, and labor costs are not a problem. The FED is running out of things to be concerned about. Ahead of the conclusion to the FED's two day meeting, the market sold the good news. The NDX took the opportunity to retest the recent lows, while the other indices remain well above their lows. While the selling was occurring in the techs, the DOW/TRAN were heading higher. Quite a mixed performance thus far today. Bonds recovered from earlier lows to be up about 1/4 point, Crude is 50 cents lower, Gold is $7.00 higher and the Euro is rallying. The probability of any type of rate increase in the forseeable future has totally diminished. We're still expecting a rate cut by March. Technically, with a retest of the lows by the NDX, and the other indices maintaining their positive bias, I'm expecting this uptrend to resume soon. The SPX/DOW/NYA/TRAN/NDX/NAZ are all in medium term uptrends, and we can now add the R2K as well, leaving only the SOX index left meandering. Thus far, we have a target of SPX 1462, the next EW pivot point. If and when the NDX can make new bull market highs, the SPX would likely exceed that target and move to the next EW pivot point at SPX 1530. For now, we still have the FED and lots of data into friday. Short term momentum is neutral, as the market has now reversed the early selling pressure, and has turned positive. This volatility should continue. Best to your trading!

MEDIUM TERM: bullish

LONG TERM: bullish.