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With Citi evidently in the grip of lunatics ' the stock was down a whopping seven cents yesterday, even as most other banking shares got savaged ' we'll shift our attention to Fannie Mae, a bellwether whose price action is perhaps more in tune with reality. Fannie's dead-cat bounce looks to have run its course, and the stock should now be presumed bound for a hidden-pivot support at 37.60 that I flagged here ten days ago. If so, that would represent a 10 percent fall from current levels. Given the fact that Fannie is by asset size one of the largest companies in the world, any such weakness could be expected to drag the broad averages down with it. Is it perhaps merely seasonal factors that are pulling the market down right now? There's always that chance. But it makes me a little nervous when shares tumble during the usually quiet Rosh Hashanah holiday. We'll be better able to judge today and tomorrow, when a more normal flow of activity returns to Wall Street. In any event, it behooves us to keep a close eye on Fannie, which will have an opportunity to trampoline from just beneath these levels if weakness continues. That would put the stock just beneath the bottom of last week's panic-stricken low ' a potential false breakdown tailor-made for short-squeeze artistes intent on distributing shares at better prices.

If ebbing fear of inflation is Wall Street's current flavor of the week, can fear of deflation be far behind? Before you answer that question, consider what was going on in the bond markets on Friday. For one, the 10-year T-note was banging away at our ambitious, hidden-pivot rally target, sending yields to their lowest levels in more than two months. And over in the TIPS market, inflation-protected securities were discounting consumer inflation growth of 2.5 percent a year, versus a 3.1% rate as recently as March. If inflation fears continue to recede at this pace for another couple of months, Mr. Greenspan is going to find it increasingly difficult to sell the idea that yet more monetary restraint is what the U.S. economy needs. Could it have been only a week ago that Wall Street was fixated on payroll figures spun by the Administration to give the impression of very strong job growth in the U.S.? Perhaps TIPS buyers are untroubled by this because they see the absence of corresponding income growth as even more significant. It would hardly be farfetched for them to infer that, no matter how many McJobs the U.S. economy creates, it won't cause much inflation if workers' paychecks aren't growing as well. Would that those who expect the dollar's collapse were able to see things as clearly. We keep hearing that there are a dozen good reasons for the dollar to fall or even to collapse. Somehow, though, the greenback keeps defying logic and, on days like Friday, sticks and jabs at bears with more than just a little sting. One wonders if the big players are starting to get nervous. Soros and Buffett have been famously short the dollar for a while, but you've got to hand it to them for keeping their