LIKELIHOOD FOR STOCK PULLBACK GROWS -- WEAK SPANISH BOND AUCTION WEAKENS EURO EVEN FURTHER AND BOOSTS THE DOLLAR -- THAT'S PUSHING GOLD AND COMMODITIES LOWER -- WEAK EUROPEAN STOCKS ARE PUTTING DOWNSIDE PRESSURE ON U.S. STOCK INDEX FUTURES
EURO WEAKNESS BOOSTS DOLLAR EVEN MORE... The likelihood for a downside correction in stocks is growing. In fact, one may already be starting. The S&P 500 remains in an overbought condition, but has yet to break any support levels. Those initial support levels may be tested shortly. The immediate problem is coming from Europe. A disappointing bond auction in Spain is causing European shares to fall today. One of the worst looking charts in Europe is Spain. Chart 1 shows Spain iShares (plotted through yesterday) trading at the lowest level in five months. That's putting downward pressure on the Euro and giving a boost to the U.S. Dollar. Chart 2 shows the Euro selling off yesterday and in the process of testing its 50-day average. [The Euro is trading lower today]. Fed minutes released yesterday gave a big boost to the U.S. dollar. Today's disappointing Spanish bond auction is weakening the Euro. The combination of a weaker Euro/ stronger dollar is taking a negative toll on commodity prices which are down today as well. Gold has already lost more than $40 in early trading. Lower stock index futures suggest that U.S. stocks will open today under heavy pressure. Initial support levels shown in yesterday's second message may be tested.
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Chart 1
