What Rally ???? – 08/04/11 © ™

That one day reversal was just that, a one day rally.  Today we are falling again and yesterday’s low is toast.  This market decline looks like 2008, small rallies and bigger decline.  The wave count is not discernible at this time and we have to rely on the channel to verify when this step down has ended.  We’ll rally eventually but I’m unsure when that will happen.  Incidentally if this decline stays on course, it will be another 90% down day (currently 95% down).  That ain’t good.

I was looking at XLY, which is a consumer spending ETF.  In 2007 this ETF gave ample warning that there was a problem in the economy.  This consumer ETF hit a new recovery high just before the mini-crash began.  Since there was no warning in this indicator, I believe the current decline “could” be unrelated to the economy.  That leaves the problems in Europe as the probable driving force of this decline.  That makes me wonder if this is deja vu all over again, meaning 2008 and the banking crisis.  There is wide spread talk that Italy is going to default and that’s the 7th largest economy in the world.  Now Europe is Europe but their problems will affect us by reduced trade, etc.  I am concerned that a significant number of US banks have written insurance against default on many of the European countries.  That would mean that a default in Europe could precipitate another banking crisis in the USA.

If it isn’t one problem, it’s another problem.

XLY ETF

08-04-11 XLF ETF DAILY BARS

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