GLOBAL STOCKS TUMBLE WHICH MEANS SHORT-TERM BOUNCE IS PROBABLY OVER -- GERMANY IS BIGGEST EUROPEAN LOSER -- GOLD HITS NEW HIGHS AS OTHER COMMODITIES TUMBLE -- FLIGHT TO TREASURIES PUSHES 10-YEAR YIELD TO ALL-TIME LOW
GERMANY LEADS GLOBAL STOCKS LOWER ... A 5% drop in German stocks is contributing to heavy selling in Europe which has spread to the U.S. Chart 1 shows the German DAX falling 5.3% to make it Europe's biggest loser. Most other European stocks are down 4%. Chart 2 EAFE Index iShares (EFA) gapping 5% lower after meeting resistance at its March low. Chart 3 shows Emerging Market iShares (EEM) gapping lower as well. Not surprisingly, U.S. stocks are following foreign markets lower. It certainly looks like the recent short-term bounce has run its course. Money coming out of stocks is moving into gold and Treasuries. Most other commodities are falling along with stocks. It looks like a bad day ahead for stocks.
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Chart 1
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Chart 2
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Chart 3
S&P 500 RALLY PROBABLY OVER... Chart 4 shows the S&P 500 tumbling more than 4% this morning after retracing 38% of its July/August drop. That's a logical spot for new selling to emerge. The recent bounce has also been on very light volume which is negative. A jump in volume today (which appears likely) would confirm that the bounce has ended. A retest of the recent lows now appears likely. Commodities (except for gold) are falling along with stocks. Chart 5 shows the DB Commodities Tracking Index Fund (DBC) gapping lower this morning. Safe haven money is pushing gold to record highs. Surging bond prices are pushing yields to record lows.
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Chart 4
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Chart 5
10-YEAR TREASURY YIELD HITS ALL-TIME LOW... With Treasury prices surging, bond yields (which move in the opposite direction) are continuing to tumble. In fact, Chart 6 shows the 10-Year Treasury Note Yield (TNX) falling below its autumn 2009 intra-day low at 2.038%. That puts the 10-Year yield at an all-time low. A close below that level would be positive for bond prices but negative for stocks because it would be a vote of "no confidence" in the global economy. Chart 6 also shows bond yields leading stocks (green line) lower
