Overnight the Euro has fallen, as Euro zone leadership appears to move away from supporting the much-anticipated Greek bail out. Instead of rubber stamp approval there are two members of the Euro zone bloc, Netherlands and Finland, pushing hard for postponement until Greece holds national elections in April. Worry that a new government would scrap any agreement made by the "care-taker" government is high.

Euro also fell on news Spain's economy is contracting for the first time in 2 years. We have discussed many times Spain as the next shoe to drop. This is unavoidable. The BBC reports Italy cancels a US order for fighter jets by 30%. This is the ripple effect of a country embracing austerity measures. Expect more of the same in various formats as governments embrace thrifty.

In a more positive vein, debt auctions yesterday in Europe went well in spite of the latest credit down-grades. This tells you that the easy money policy from the ECB is working as support for Euro zone nations.

Equity index futures in the USA are holding up well considering the drop in the over-night Euro. US equity indexes have fallen, but not hard. Russell 2000 looks like it wants a test of 800. Our IWM trade would certainly benefit. TF tested S1. A downward thrust to S2 is not out of the question. S2 is 797. With two days left in the IWM trade, I am not about to linger if we see 800 area or lower tested. On the intra-day chart, S1 is 804.20. S2 is 797.30. Price is moving up toward the main intra-day floor pivot for test.

This morning's US initial unemployment claims number dropped by 13,000 to 348,000. This is the lowest level in almost 4 years and market positive. January housing starts up 1.5%...at least it is positive. It is hard to get a read on the market today. US fundamentals are better than the Euro zone, yet Euro zone fundamentals have direct affect on US multinationals. The big picture is Euro of course. A falling Euro signals risk avoidance. A rising US dollar typically has an effect of moving the stock market down. US dollar surged in overnight trading back over 80! 80 is support once again.

It would not surprise me to see professionals take the market up before dropping it back into down trend. I am not predicting...just making note of the behavior where they try to trap the retail index day trader. This is a big time bull/battle since prices have dipped to the lowest level in a week and bearish forces will feel like pushing harder. The big question is how long can the indexes remain supportive in the face of a surging US dollar and falling Euro?

ES 1339 area on daily chart remains a strong support level. 1330 area is S1. S2 is 1318.50. That red price trend line we drew on ES daily chart continues holding price! ES intra-day price action finds three tests to S1 at 1334.25. With three tests, it is important to note that if price moves below this level, the machines will react and a run to 1326 (S2) should occur. When ES drops, everybody drops.

Corn is down in the overnight session. Our spread trade is in slight profit thanks to China buying a boatload of soybeans and passing up Corn. Crude is slightly down. Sugar is flat. Silver has taken a strong drop. Monitor the SLV position today. Gold and Silver are making a run to their respective 34 EMA lines.

February options expire on Friday. Also...we have a US trading exchange holiday on Monday. This means Friday trading should be quiet after lunch tomorrow.

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