Europe's Pain Keeps World Markets in Red as Week Begins Badly

Back in the headlines again, Europe's continuing woes took front and center position in Monday's investment landscape.

Spain kicked off the festivities with a formal request for aid of up to 100 billion euros for their busted banking sector as they await a ratings cut from Moody's on all Spanish banks, expected to be delivered after the close of US equity markets.

The reality of another bank bailout by the EU and the rumors of the Moody's downgrade was enough to send all European indices lower, lead by the Athens Index Composite, which fell 6.84%. The Swiss Market was harmed the least, down on 0.75%, while the French and German bourses fell by more than two percent.

Greece added to the downside momentum as newly-appointed Finance Minister Vassilis Rapanos resigned his post due to ill health. The tiny island nation of Cyprus became the latest victim, telling the EU that it needs a bailout for its banks - heavily exposed to Greece - and its public sector economy. Estimates call for immediate funds of between 5-10 billion Euros to keep the nation banks and government operating.

US markets fell out of bed like a drunk with a bad hangover, down right from the opening bell through to the close, with the NASDAQ leading the way lower, followed closely by the S&P 500.

Stocks staged a small, uninspired rally near the end of the day, but there was little support to the buying. The evidence that the world is on the brink of a catastrophic global depression are simply too obvious to mask further. Investors are running scared money into the meat-grinder that is otherwise known as the capital markets in hopes that the European leaders will offer some kind of plan to end the crisis, one which has already spread across the nations on the southern periphery.

Internals suggested that today's moves could be a turing point for US markets as losers led gainers by a more than 3:1 margin and new lows outnumbered new highs by nearly 2:1.

The new highs to new lows reading, which has been consistent over the years as an early indicator of bullish and bearish trends has recently vacillated between positive and negative, so a sustained period in which new lows exceed new highs would point toward a more severe downturn and a return to bear market conditions.

As of today's close, the Dow is resting at 6% below the May 1 highs, so a move below 11,000 would have to be reached before true bear market conditions (-20%) would prevail. With the situation in Europe continuing to unravel and conditions in the US not gathering any momentum and actually, according to the latest data, already showing signs of stress and weakness, a downturn of that severity cannot be ruled out through the summer months, which are traditionally a slow period for stocks.

Whether the pain comes in the form of a sudden event or as a slow, painful, prolonged ordeal depends greatly upon how panicked investors become. With news and events so highly unpredictable, but bordering on crisis levels, a major happenstance could come from any quarter, be it Syria's upheavals, Germany contentious position or the collapse of Greece or Spain or even the unthinkable, Italy or France.

Once again, it cannot be stressed too much that events may be politically manipulated to coincide with the US presidential election in November, so great caution is urged, especially into the latter stages of the election cycle, late September into October.

Of course, media control being practically omnipresent, the outbreak of war or economic apocalypse could be spun into a positive, though that kind of propagandizing would only satisfy the controllers wishing to make a quick killing as it would likely be unsustainable in light of the true picture.

Following Friday's phony fermentation to the upside on global banks' repudiation of Moody's massive, across-the-board downgrades, it's a very good possibility that the manufactured rally was nothing more than another scam on the public to the profit of the banking cartel, who went long and then short, winning on both sides of the trade.

With that kind of perfidious behavior prevailing in nearly all capital markets, day-to-day movements should be greatly discounted and longer term trends the focus of greater scrutiny.

Dow 12,502.66, -138.12 (1.09%)
Nasdaq 2,836.16, -56.26 (1.95%)
S&P 500 1,313.72, -21.30 (1.60%)
NYSE Composite 7,491.90, -124.69 (1.64%)
NYSE Volume 3,433,923,250
Nasdaq Volume 1,432,183,125
Combined NYSE & NASDAQ Advance - Decline: 1362-4261
Combined NYSE & NASDAQ New highs - New lows: 87-163
WTI crude oil: 79.21, -0.55
Gold: 1,588.40, +21.50
Silver: 27.52, +0.86