GREEK DEBT REFERENDUM SENDS GLOBAL STOCKS AND COMMODITIES TUMBLING -- BONDS ARE ONLY WINNERS -- GERMAN AND FRENCH SHARES NEGATE LAST THURSDAY'S UPSIDE ACTION -- U.S. STOCK INDEXES FALL BACK BELOW THEIR 200-DAY AVERAGE
EUROPEAN STOCKS TUMBLE ... The surprise announcement that Greece will hold a voter referendum on the European bailout plan has thrown the entire rescue plan into doubt and has unsettled global markets. European shares tumbled on the news and everyone else with them. Charts 1 and 2 show French and German stocks falling near 5% this morning on the news. Both have gapped lower and have negated last Thursday's positive price action. In fact, today's intermarket reactions are a complete mirror image of the bullish euphoria that followed last Thursday's announcement of a Euro debt deal. Chart 3 shows the Euro gapping 1.5% lower and, in the process, falling back below its 200-day average. The resulting jump in the dollar is causing heavy selling selling in stocks and commodities. As usual when that happens, bond prices are rising.
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Chart 1
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Chart 2
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Chart 3
STOCK INDEXES BACK BELOW 200-DAY LINES... Last Thursday's Euro-inspired price surge pushed several U.S. stock indexes back above their 200-day moving averages. Today's Euro-inspired price plunge has pushed all of them back below that important resistance line. The inability to hold last week's gains raises the prospects of a failed test of the 200-day line. It also keeps the current bounce within the confines of a bear market rally. Today's closing prices, and the level of trading volume, will tell us a lot more about how bad a day it really is. Heavy downside trading would add more emphasis to the negative price action.
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Chart 4
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Chart 5
