The onslaught continues this morning, as of this writing Dow Jones futures are indicating down more than 200 points and stocks around the world have been crushed overnight.
The month-long meltdown is continuing because of the following litany of woes:
Technicals: Every chart is broken. Markets may be temporarily oversold, but the appetite hasn’t been there just yet to play a bounce with the S&P now under its 200 day moving average and the bad news still coming steadily.
Double Dip Worries: The last handful of jobs and housing stats weren’t so hot and have done little to inspire confidence that the growth and recovery are sustainable.
Spain: The opacity of the Spanish banking system is starting to give way under the harsh light of reality and the more we see, the less we like. Spain is much larger than Greece in terms of economic impact so any major stress from that front is amplified.
China: While the Maoists have been working overtime to orchestrate a soft landing and a gradual real estate cool-off, the CRB index of commodities has been absolutely schmeissed. So have stocks in Shanghai (down roughly 20% from their peak). China now has one of the worst performing stock markets this year and has actually just announced a standstill to their tightening plans – the central planners may have gotten spooked.
North Korea: So the grass-eating lunatics from North Korea want to sink South Korean ships now? Terrific. Bet you can’t find a Chief Global Strategist at a brokerage house who tells you that a second Korean War in “priced in”. Yeah, didn’t think so.
Warning Season: One of the few positives we had was the fact that corporate earnings were strong – stronger than anything we expected. This optimism enabled stocks to climb to new highs during the last earnings season even after the initial shocks from Europe’s sovereign crisis were felt in February. Now earnings are behind us and there is nothing but warning season and ‘fess up time ahead. We’ve already heard about a series of charges related to the new health care bill from large employers…what other warnings will we be hearing over the next few weeks?