SPAIN LEADS GLOBAL SELLOFF AS DEFAULT FEARS GROW IN EUROPE -- COMMODITIES ARE SELLING OFF HARD AS DOLLAR RALLIES -- SO ARE COMMODITY-RELATED STOCKS -- THE ONLY OTHER SAFE HAVENS ARE TREASURIES AND THE YEN

SPAIN SHARES LEAD GLOBAL RETREAT IN STOCKS AND COMMODITIES... Growing fears that some European countries may have trouble financing their deficits is rattling global stock and commodity markets. Those fears started in Greece and have now spread to Spain and Portugal. Chart 1 shows Spain iShares (EWP) tumbling 7% to lead a global flight from stocks. European problems have also pushed the Euro to a new low (Chart 2) as the U.S. dollar has rallied. The rising dollar is putting heavy downside pressure on commodity markets. Chart 3 shows the DB Commodities Tracking Index (DBC) falling below its 200-day moving average. Crude oil is down 3% and gold has fallen by $45. With European bond markets in turmoil, U.S. Treasury bonds are one of the few winners (Chart 4). So is the Japanese yen which continues to attract safe haven money. Chart 5 shows the Japanese yen surging 2% against the dollar. It's doing even better against most other currencies which are falling. All of those trends are consistent with a global correction of at least intermediate proportions that we've been warning about since the start of the new year.

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U.S. STOCKS RESUME INTERMEDIATE CORRECTION ... U.S. stocks are following the rest of the world lower. The next three charts show major U.S. stock indexes averaging losses of 2%. All three remain well below their 50-day moving averages and (as I suggested on Tuesday) appear headed toward their early November lows and possible retests of their 200-day averages. Commodity-related stocks (basic materials, gold, energy) are among the day's biggest losers. Semiconductors are down nearly 4% and are weighing on the technology sector which has been leading the market lower for the last month.

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