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Alan Greenspan's Humphrey-Hawkins testimony revealed little that we had not heard before, with the exception of the Fed's belief that the impact of commodity price swings on the economy is now diminished . As expected Greenspan delivered the standard "no inflation now, but we remain vigilant" speech.

Where Greenspan surprised was in the tone of his speech. Gone was the usual even handed balancing of the current state of affairs with the need to be pre-emptive.  The Fed chairman, obviously having caught a whiff of the smell of rampant complacency wafting through the air following the last FOMC meeting, arrived on the hill donning the attire of that noted inflation vigilante The Pre-Emptive Crusader.

While Greenspan offered nothing new, the emphasis on being pre-emptive against the development of future inflationary bottlenecks served as a wakeup call to the majority of market participants who had grown complacent after having fallen victim to the widespread belief that one rate hike would cure all.

Greenspan's speech has returned the focus of trader's to the economy.  With earnings season largely a washout in terms of its ability to lift the market, the market is now left at the mercy of its greatest nemesis: uncertainty.

A repeat of the week's leading up to the June FOMC meeting is now in store, with the market gaining sustenance from each iota of economic data that is fed to it.

The market enters this latest era of uncertainty in a weakened state, with a clear leadership void developing.  The recent leaders are floundering: oil stocks have weakened, tech stocks are floundering, and perhaps most importantly, the market's main drivers, euphoria and complacency, have begun the inevitable pendulum swing towards the opposite extreme.

We did see some signs of health returning to the market yesterday: the strength of financial issues, the flow of money to lower P/E stocks, the ebbing of euphoria in the tech and Internet sectors, the emphasis on present results and profits rather than year 2005 promise (the drubbing taken by Amazon.com following its revenue report).

The fate of the markets rests squarely on the shoulders of Alan Greenspan this morning.  While the after the bell news of AOL's subscriber growth shortfall and Amazon.com's spending plans will put pressure on the Internet stock's this morning, it is Greenspan alone who can breathe life into the stock market's waning summer rally.

While Greenspan is unlikely to give the stock or bond market what they are looking for: a confirmation of the belief that the June 30th change in bias signaled that the Fed's work was done, he is also unlikely to cause panic in the pits by signaling  that another rate hike is imminent at the August meeting.

Today we are likely to hear Greenspan say, "while we see no signs of inflation in the current economy, we remain vigilant...".  Words that could cause a temporary relief rally in the days ahead, a rally which will likely be undone as the good news flow of earnings season subsides and traders once again live economic report to economic report, with uncertainty capping any upward movement by the stock or bond markets.

The usual suspects appeared, that peculiar breed of camera happy market guru that vacillates between being long term bullish on up days and long term bearish on down days, and with lightning speed the start of a precipitous decline was proclaimed, and in a blink the search for a bottom was on.

While we think that talk of a bottom is premature, perhaps because we have yet to see a market correct from extremes of euphoric sentiment in a day, a short term bounce is within the reigns of possibility.  Despite yesterday's selloff, the short term trend remains up, but just barely. The ability of  the Dow and the S&P 500 to hold support yesterday, 10985 and 1374 respectively, is bullish in the very short term, but Greenspan on the hill tomorrow will quickly negate the positives of yesterday's last minute bounce off support.

While the market's successful test of support was a positive yesterday, the still rampant complacency that permeates the market is decidedly negative for the future.  While some pockets of fear have begun to seep into the market, they have yet to spread far enough to proclaim a bottom.

Yesterday's meteoritic rise in the share prices of the day's crop of Internet IPO's is evidence that the euphoria of last week remains bubbling just below the surface.  Today we are likely to see IPO fervor return to its former full glory with the debut of MP3.com.  Bottoms do not happen when the IPO market is booming, quite the opposite.

If you're looking for a bottom, it is likely to be a several month wait.  While powerful  intermediate upward blips may occur, a market bottom will not be in place until euphoria is fully wrung out of the market and fear and panic are the predominant emotions--and that does not happen in a day. The sentiment pendulum must swing from one extreme to another, and in the case of a swing from extreme levels, it must often overswing to reach its destination.  The time needed to reach a state of investor panic and the market bottom that corresponds with it is a far shorter path than the one needed to reach investor euphoria, but it still takes time.

Perhaps the major averages succumbed to something more than profit taking yesterday, perhaps the red arrows were more a result of the far more dangerous affliction known as Ye Olde Seeping Sentiment Bubble.

Even euphoria has its limits, and it is becoming apparent that those limits have been reached.  Reached in fact just before the season's first earnings number rolled out of the chute.  We have seen company after company exceed the wildest expectations of Analysts, only to have their shares fall prey to profit taking.

Yesterday Citigroup and Bank of America reported stellar earnings, and the banking sector slipped 0.4%.  Perhaps nowhere has the urge to sell on the news been greater than in the tech sector however, and in this case, the profit taking has been a result of trader's slowly realizing that even the whisper number was far below the euphoria number that had been built into the NASDAQ Composite.

That euphoria number is 125, the historically high P/E ratio that the NASDAQ Composite sported at Friday's close.  Thus 62% earnings growth from Microsoft might have a nice ring to it, but it is a growth rate which is far below that which has already been priced into the average NASDAQ stock.

The expected earnings season market boost is not to be.  One by one the big guns have been rolled out, and the results have failed to excite.  Since yesterday's close IBM, Microsoft, Lucent, Qualcomm, and GM have all exceeded, and yet the S&P futures have been steadily developing a deeper hue of red with each passing release.

The market needs a confidence boost to resume its climb to the prophesied Labor Day 12,000, and the burden of providing that booster shot has now passed entirely to Alan Greenspan, who is unlikely to give his full fledged endorsement to a run at new heights of euphoric sentiment....

....especially after the release of the latest trade figures, which showed the consumer's desire to splurge driving the deficit to a record $21.3 billion, far above the expected $19.2 billion.

The week begins with confidence in the future of the New Paradigm Express running at full throttle, and nowhere is that confidence higher than in the largest of the large, as investors one by one succumb to the credo that "bigger is better".

 We're told "this time its so different...", but we've seen this same story played out before, and if our memories serve us right, the final scene is not a pretty one, and the countdown to the last call has begun.

The market is dropping hints at an accelerating pace that the final act is set to begin.  The cheers as Microsoft became the first $500 billion company on Friday should have been tears.  The recent outperformance by the largest cap stocks is not a sign that better days lie just ahead.  Rather, it is a signal that the best has already passed.

As a strong rally nears its end, the scope of the rally increasingly becomes focused on a steadily narrowing list of large cap stocks, the Bluest of the Blue, the marquee names.

While the majority of market participants enter the week still singing the praises of new highs by the 3 major averages on Friday and seeing nothing but blue sky ahead, perhaps they should be taking some money off the table instead.  The failure of the Transports and Utilities to participate in the post bias shift/pre earnings party is one of those glaring intramarket divergences that make us fret.

Perhaps more troublesome than the rapid adoption of the "bigger is better" credo, or the divergence between the 3 major averages and the Transports and Utilities, is the rapid rise in complacency.

While we have spotted the random news report that "Jitters are Increasing as Greenspan on the Hill Approaches", we have yet to see it in the market.  What we are seeing is quite the opposite, and we are seeing this opposite approach levels that traditionally have caused the safety nets to be rolled out beneath windows up and down Wall St. and Broad St.

The latest survey of individual investor sentiment, the American Association of Individual Investors survey, shows the number of bears dropping to an alarming 18%.

Equally alarming is the extreme complacency of more experienced investors and traders.  The Volatility Index (VIX) closed Friday at 18.13, a level which was last seen at this time last July just before the market began a 3 month slide. This low level is particularly worrisome because it occurred at a time when worries should have been increasing rather than decreasing ( during a week of a flight to quality prompted by global fears and ahead of this week's Humphrey-Hawkins testimony).