It does not take much to turn this market.

In Friday morning’s post I said: “a 5% correction would be good and healthy and we’ll be looking to hold the samelevels we set on the way up on this pullback – those would be: Dow 7,636, S&P 805, Nas 1,525, NYSE 5,075 and Russell 420, roughly 15% off the bottoms with 5% rule adjustments.” and we got 1/2 of that move on Friday (the 2.5% rule) and Ireminded members over the weekend: “Don’t forget I was looking for something like a 5% pullback and “all” we got was 2.5% so far.”

So let’s not be all “shocked” that there’s a pullback today. It’s the same pullback as we had on Friday, following through to where it belongs. Timing-wise, it was to be expected as we run-up to the G20 and my catch-phrase prediction for this week was: “While Obama’s away, the bears may play” and it looks like the bears are bringing their “A” game this week, pressing hard before Obama is even airborne for his European tour.

The newsflow turned sharply negative this weekend as well but not much of it matters other than Rick Wagoner being forced to resign after the Administration rejects the automaker’s latest plan (Chrysler’s too). While much is being made of this – it’s actually a very positive thing as the government is playing hardball with GM debt-holders and the unions to wring concessions from them that will bring the turnaround plan in line. Although they are tossing out the “B” word, the administration said it would provide the company sufficient working capital for 60 more days, during which a revamped GM board and top management has to put forward a much more rigorous restructuring plan than it submitted last month.

A GM bankruptcy is, unfortunately, one of the three things I have long saidthat could each knock 20% off our 8,650 midrange. Even more unfortunately, our other two market killers -the bankruptcy of a major financial institution or the default of a less-than minor country – are both still firmly on the table as possibilities. Speaking of countries that may default – Russia’s economy is forecast to shrink another 4.5% this year. “As the crisis continues to spread to the real economy around the world, initial expectations that Russia and other countries will recover fast are no longer likely,” the World Bank said in a report today. In…
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