The market has more work to do on the downside, but I do have some reservations. I have reservations because I don't know what former Goldman Sachs boss, and current Treasury Secretary Hank Paulsen has up his sleeve. All things being equal, and with no more funny business from the Plunge Protection Team, the market should continue to head lower.

When you look at all the evidence, I don't see how the market can hold up;

1) Fed Chairman Ben Bernanke said today that;

a) "Economic growth will be modestly below trend in the near term." (Earnings are coming down)

b) "A failure of inflation to moderate as expected would be especially troublesome."(Inflation is still a problem)

c)" In the case of inflation, the risks to the forecast seem primarily to the upside."(Dido)

d) "Whether further policy action against inflation will be required depends on the incoming data and in particular how these data affect the FOMC’s medium-term forecasts."(No, we are not going to lower rates anytime soon)

e) The housing market "is likely to be a drag on economic growth into next year.' ``The correction to the housing market could turn out to be more severe and widespread than seems most likely at present,' ``to date there is little evidence that the weakness in housing markets is spilling over more broadly to consumer spending or aggregate employment.' If these trends continue, growth ``might return to a pace that could intensify upward pressures on resource utilization.' (We have not scene the bottom in housing, and consumers are crazy)

f) ' Still, wage and salary growth has supported consumer spending." (Inflation is all around us and consumers are still crazy)

g) Food and Energy prices are still above our ``comfort' range. (More inflation)

Need I say more? I think I will.