The markets initially bolted higher with the Dow and S&P500 rising over 300 and 30 points respectively. However, the markets seemed to stall out around a key technical level with SPX failing to break 1,200 and the markets started to pull back. To make matters worse for the bulls, the Financial Times then reported that there was a split in the Eurozone over the terms of Greece’s second bailout. This report seemed to be the proverbial water on the bullish flames that were ablaze lately with renewed hope of a solution to the debt crisis in Europe.
While the markets have whipsawed the last 5 days, they’ve really only completed two things. They put in a lower low last week, and a lower high today, this is overall bearish. Furthermore, the latest developments out of Europe should remind the markets that a solution to Europe’s problems are not going to be as easy as increasing the size of the bailout fund. Such an increase puts the credit ratings of countries like Germany at risk, and it is unlikely Germany is just going to let that go forward without having something to say about it.
In addition, the U.S. data out today was nothing to write home about. Richmond manufacturing activity came in at a negative reading. Though the -6 reading was above the consensus for a -9 level, it’s still not good at all and represents contraction. Consumer confidence also remained depressed as American’s worried about their current & future incomes. The lone silver lining was that the Case/Schiller home price index showed improvement in 17 of the 20 cities that the index tracks, but the housing market still remains miserable.
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