European Leaders Will Have To Do Dramatically More!
Tuesday, June 12, 9:25 a.m. Sunday’s even larger than expected bailout offer for Spain’s banks was not enough to buy even a one-day rally? It not only failed to raise the confidence of markets regarding Spain’s precarious position, but sparked increased concerns that Italy is following closely behind on the steepening slippery slope that the [...]

Tuesday, June 12, 9:25 a.m.

Sunday’s even larger than expected bailout offer for Spain’s banks was not enough to buy even a one-day rally?

It not only failed to raise the confidence of markets regarding Spain’s precarious position, but sparked increased concerns that Italy is following closely behind on the steepening slippery slope that the eurozone has become.

Yields on Spanish and Italian debt are rising again today, the yield on 10-year Spanish bonds rising to 6.62%, and Italy’s to 6.15%. And the cost of insuring 5-year Spanish debt via credit default swaps rose to 6.05%, a new record, while the cost of insuring Italian debt rose 0.11% to 5.61%.

Markets are just not buying the bailout of Spanish banks as a solution to Spain’s government debt crisis.

Officials are going to have to go back to the drawing board and come up with something much more dramatic.

And once efforts begin not having even short-term effects on markets, disappointing partial solutions can become self-defeating.

We have only to look back at how the 2008 financial meltdown in the U.S. progressed.

In March 2008, the initial $29 billion bailout of banks created a four-month stock market rally. But as the situation worsened, the $178 billion stimulus package for consumers in May was not accepted well by markets, which began selling off sharply. And from there on it was a steady stream of ever larger bailout packages that the markets looked on as band-aids that wouldn’t solve the overall problems. The $200 billion bailout of Fannie Mae in September, the additional $700 billion bailout of banks in October, the $787 billion ‘American people’ stimulus package in  Feb., 2009, and so on, each one resulting in only further market meltdown as the problems increased and the piecemeal efforts failed.

Europe may be on the same course already if they don’t come up with something dramatic very soon. 

U.S. market is still at interesting juncture.

Intermediate-term the major indexes broke down through intermediate-term support levels, until they reached the long-term 200-day m.a. week before last. And with last week’s rally they bounced off that potential support.

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Short-term, last week’s big rally recovered most of the sharp decline of the previous 4 days, and popped the major indexes above the short-term resistance at 21-day moving averages, but only fractionally, and did not break the negative pattern of lower highs and lower lows.

And yesterday’s sharp downside reversals broke them back beneath the m.a., but only fractionally.

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Subscribers to Street Smart Report: In addition to the charts and signals in the premium content area of today’s blog, there is an in-depth signals report on ‘Bonds, Gold, the U.S. Dollar, and Commodities’ in the subscribers’ area of the Street Smart Report website from yesterday. And please also stay tuned to the hotline!

To read my weekend newspaper column ‘What’s Wrong With Gold?’ click here.

Yesterday in the U.S. Market.

The bigger than expected bailout effort for Spain wasn’t even able to buy a one-day rally?

The Dow was up almost 100 points in the early going, but when European markets began giving back their early gains, the U.S. market also rolled over to the downside to close with the Dow down 142 points. A 240 point downside reversal. Ugly, ugly, ugly.

The Dow closed down 142 points, or 1.1%. The S&P 500 closed down 1.3%. The NYSE Composite closed down 1.3%. The Nasdaq closed down 1.7%. The Nasdaq 100 closed down 1.6%. The Russell 2000 closed down 2.4%. The DJ Transportation Avg. closed down 1.4%. The DJ Utilities Avg closed down 0.4%.

Gold closed up $3 an ounce at $1,596.

Oil plunged $2.19 a barrel at $81.91.

The U.S. dollar etf UUP closed up 0.1%.

The U.S. Treasury bond etf TLT closed up 0.5%.

Yesterday in European Markets.

European markets were up very strongly in the early going, averaging gains of around 2%, but then gave up the gains in significant downside reversals. The London market gave up all of its gains to close down 0.1%. The German DAX gave up most of its gains to close up only 0.2%. France’s CAC gave up all of its gains to close down 0.3%.

Asian Markets surged up Sunday night but back down some last night.

The Asia Dow closed up 1.7% Sunday night as most Asian markets reacted positively to the report Sunday that Spain would receive a substantial bailout for its banks.

But after European markets and the U.S. market experienced substantial downside reversals from their initial positive responses, Asian markets were back down some last night.

The Asia Dow closed down 0.8% last night.

Among individual markets last night:

Australia closed up 0.2%. China closed down 0.7%. Hong Kong closed down 0.4%. India closed up 1.2%. Indonesia closed down 0.4%. Japan closed down 1.0%. Malaysia closed down 0.2%. New Zealand closed down 0.8%. South Korea closed down 0.7%. Singapore closed up 0.3%. Taiwan closed down 0.7%. Thailand closed up 0.4%.

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Markets This Morning:

European markets are off earlier highs, but still up. The London FTSE is up 0.4%. The German DAX is up 0.7%. France’s CAC is up 0.2%.

Oil is up $.46 a barrel at $83.16

Gold is up $6 an ounce at $1,604 an ounce.

This Morning in the U.S. Market:

This week will be a light week for potential market-moving economic reports. Only a few are due, including the Producer Price Index, Retail Sales, Industrial Production, Consumer Sentiment. To see the full list and times for each release click here, and look at the left side of the page it takes you to.

There were no reports yesterday.

This morning’s report was that the Small Business Optimism Index declined fractionally in May, not a market-mover. And in Europe The U.K. reported its industrial production fell 1% in April, its 14th straight decline, and manufacturing output fell by 0.7%.

With few important economic reports so far this week the market’s focus is back on the eurozone crisis and the various opinions of where it’s headed.

Our pre-open indicators have given up most of their earlier strength, following the partial rollover in European markets, but are still somewhat positive.

Our Pre-Open Indicators:

Our pre-open indicators are pointing to the Dow being up 40 points or so in the early going.

Non-subscribers: We have updated the sample issue of the newsletter to a more recent issue that you might find interesting. Click here to view it: Sample issue of Street Smart Report newsletter.

To read my weekend newspaper column ‘What’s Wrong With Gold?’ click here.

Subscribers to Street Smart Report: In addition to the charts and signals in the premium content area of today’s blog, there is an in-depth signals report on ‘Bonds, Gold, the U.S. Dollar, and Commodities’ in the subscribers’ area of the Street Smart Report website from yesterday. And please also stay tuned to the hotline!

I’ll be back with the next regular blog post on Thursday morning at 9:25 a.m.

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