What’s Bothering The Market Today – 07/11/11 © ™

We are in a multi-step down, which began last Friday and are currently in step 2 down.  Is this the end of the advance that began on June 16th.  It’s possible, but I’ll wait for confirmation before issuing a short term sell signal.  A short term sell could possibly involve an intermediate term sell too. It would mean that the decline from May 2 to June 16 was only step 1 down and we were at the half way point (down) on June 16.  We’ll have to wait and see how this works out.

Presently this is the scenario of the head and shoulders formation coming true.  I had said before that too many people were looking for this scenario.  It all seems too comfortable to fit as the stock market doesn’t usually work so easily.  But strange things can and do happen, so we’ll wait and see the resolution without making up our minds prematurely.

The DJ Industrials are down 151 at the moment. That’s not too bad if the world was ending.  World ending means down 500 or more.  Remember 2008 when the world WAS ending???  Of course the realization that the world is ending comes slowly at first.

07-11-11 TSX INDEX

The problems other than the debt ceiling are in Europe’s lap.  Europe’s problems could spread to the US via lower exports to Europe because their economies would be slowing.  Europe isn’t out of ammunition and will do the right thing (for now).

The debt ceiling is a problem that should resolve itself by a compromise.  If no compromise is reached, blame the Tea Party for their reckless pursuit of no deficit.  No deificit is OK but it must be pursued in a reasonable manner.  The Tea Party doesn’t understand the consequences of a default.  Ideologists seldom understand what they are doing or the consequences.  Ya gotta remember your history for that sentence to make any sense to you.  Republicans will be reasonable before a default takes place.  Cooler heads usually prevail, it is only when right or left wing ideology takes over the thought process that things can truly go wrong.  We all realize that middle of the road is the best policy.  Think about it.

From today’s Business Insider, a sometimes sensationalist online business newspaper.

A quick update on the total wreck in markets right now:

  • Italian stocks are off 3.4%.
  • Short-term Italian yields are going berserk
  • Spanish stocks are off 2.8%
  • 2-year yields: Same mess.
  • Shares of Deutsche Bank are down 2.7%.
  • Dow futures are off 130
  • Gold is surging to near an all-time record

Basically: we have debt crises on both sides of the Atlantic right now.

In Washington, politicians can’t defuse a bomb of its own creation (the artificial debt ceiling nonsense) and in Europe the crisis has spread to Italy, which is 10-times more terrifying than Greece.

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