President Obama's bipartisan deficit commission appears to have failed to reach a compromise and recommend a specific deficit-cutting plan, since the commission was unable to reach a consensus and has released multiple plans, first by its co-chairs and then by other members. Similarly, negotiations to extend Bush tax cuts appear to have reached an impasse, making it unlikely that the issue will be resolved before yearend. We still expect a deal to be reached, perhaps with Republicans agreeing to an extension in unemployment benefits, a commitment to raise the deficit ceiling, and/or comprehensive tax reform in exchange for an extension of all the Bush tax cuts. Without an extension, we think the stock market will have trouble decisively breaking to new highs, and the economy is likely to suffer in the short term, although long-term budget issues will need to be addressed.

David Fuller's view There is an element of farce to all this and I wonder if America is even governable at this time, interms of a coherent deficit reduction plan.

What about the markets?

It is clear that investors still like gold (weekly & daily), and so do we over the medium to longer term. Currently, there is still some scope for additional sideways and possibly a little lower ranging mean reversion towards the rising 200-day moving average, before the overall upward trend is resumed.

With no credible plan to reduce the budget deficit and the Fed rooting for some inflation, I doubt that US 30-year T-Bond futures (weekly & daily) are seeing more than a temporary technical rally at present. This is in response to a short-term oversold condition, plus a corrective phase for stock markets following their earlier persistent gains. I maintain that US 10-year Treasury Bond Yields (historic & weekly) are in a gradual bottoming out phase, signalling an end to the 30-year bull market in terms of falling yields. Therefore the secular bear market for US long-dated Treasuries in terms of gradually and erratically higher yields has commenced.

Euroland's ongoing PIIGS sovereign debt crisis - this time with the spotlight on Ireland, is pushing the euro (weekly & daily) lower and the US Dollar Index (weekly & daily) higher.

The global stock market corrective phase, forewarned by Fullermoney in the daily Audios and also Comment of the Day during the last three weeks, is mainly in response to prior gains over twelve or more consecutive weeks for most stock market indices. It has also received an additional shove from Ireland's debt problems and China's inflation concerns.

Technical evidence of this corrective phase, described in advance of the event, can now be seen in the combinations of recently failed upside breaks, downward dynamics, breaks of rising lows within the prior short-term uptrends, and the ranging loss of upside momentum. It would be prudent to expect this process to continue for a while longer, in what is at least a partial mean reversion towards the rising 200-day moving averages.

Here are some examples of indices showing one or more of the short to medium-term topping characteristics described in the paragraph directly above: Hong Kong (weekly & daily), Singapore (weekly & daily), India (weekly & daily), UK (weekly & daily), Germany (weekly & daily), Brazil (weekly & daily), Argentina, (weekly & daily) and USA (weekly & daily).

Moves closer to the rising MAs are likely to be buying opportunities in the Fullermoney themes listed on Friday although investors may wish to see some technical evidence of steadying before committing fresh capital.