SPIKE IN ITALIAN YIELDS CAUSES HEAVY SELLING IN EURO STOCKS -- US STOCKS EXPECTED TO OPEN SHARPLY LOWER -- THAT PUTS THE RECENT RALLY IN JEOPARDY
50-DAY AVERAGES IN JEOPARDY AGAIN... Yesterday's optimism about the turn of events in Italy has proved to be very short-lived. Italian bond yields have spiked over 7% for the first time since the Euro was created. The breaking of that threshold is causing heavy selling of European stocks. Charts 1 and 2 show the French CAC and German DAX indexes falling more than 2% this morning. Italian stocks (not shown) are down 3.5% percent. That puts the 50-day day moving averages in jeopardy once again. Big drops in U.S. stock futures call for a sharply lower U.S. opening. That's coming at a bad time since the U.S. stock indexes are in the process of testing major overhead resistance at their 200-day moving averages. Meanwhile, Treasury bond prices are trading sharply higher as stocks drop. We'll keep an eye in developments as the day proceeds.
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Chart 1
