EUROPEAN MARKETS FALL ON MONDAY ALONG WITH US STOCK FUTURES -- INTERMARKET RELATIONSHIPS STILL PAINT A NEGATIVE PICTURE FOR STOCKS AND COMMODITIES AS A RISING DOLLAR HURTS BOTH -- CORPORATE BONDS PLAY CATCH-UP

EUROPEAN MARKETS FALL ... Although U.S. markets are closed for the Martin Luther King holiday, foreign markets are open. And, unfortunately, most of them are dropping. That includes Brazil, Canada, and Europe. Stocks fell in all 18 western European markets. A catalyst for European weakness was a 67% plunge in the Royal Bank of Scotland. Britain took another shot at fixing its financial system by offering to buy toxic securities. British stocks fell nearly 1%. U.S. stock futures are down as well. [Source: Bloomberg.com]. Monday's weak foreign action appears to be continuing the trend seen over the last month. With the dollar rising, foreign shares are falling faster than those in the U.S. Commodity markets remain weak as money continues to flow into bonds. [See Chart 1].

Chart 1

MONTLY PERFORMANCE BARS CARRY NEGATIVE MESSAGE... The performance bars in Chart 1 show where some money has been coming from over the last month and where it's going. Starting from the left, the weakest markets are EAFE iShares (red bar) and the S&P 500 (blue bar). That shows that foreign shares have been falling faster than those in the U.S. Part of the reason for that is weakness in foreign currencies like the Euro (green bar) and strength in the U.S. Dollar (black bar to the right). The rising dollar is also keeping the CRB Index (pink bar) under pressure. The light blue bar shows that Treasury Bonds have experienced some profit-taking over the last month, while investment grade corporate bonds (last bar to the right) are attracting some fixed income money. Unfortunately, these intermarket relationships still paint a negative picture for global stocks and commodities.