http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=6&dy=0&id=p16768279576&a=214966864

European news papers are referring to the revival of Burlusconi in the Italian elections as the rise of the living dead, and as a vampire, and that is certainly metaphorically true.  For a decade the Italian clown has sucked the life out of the Italian economy and hindered development in Italy and in all probability colluded with the Mafia.  Today traders used fear of Burlusconi’s resurgence as an excuse  to sell off the market sharply.  Their reasoning, that  Italy’s  position in the  European community and its commitment to fiscal responsibility are endangered.  Contrarians have been champing at the bit to take down the market and there is some basis for considering the market overbought and ripe for correction.  We had, in fact 36 days of up wave for 9.4%.

While we are, for trading purposes, hedging partially we think the best policy is just to sit out what will probably be a shallow reaction, and we will be increasing our positions when the downdraft is over.