Ahead of the open, (11-04)

During US premarket,  SP futures were green despite the major Euro DJ Composite down a 1%.  Considering the equity meltdown that transpired (-1.6 to -1.8% on major U.S indices), it seems most likely were thinking Europe was just playing ‘loss’ catch up after being closed since pre- NFP#.  Judging by the 1% morning loss, you could say Europe was also sleeping at the wheel to its own stresses as peripheral yields had already swelled in Spain to 5.89% and Italy’s to 5.57%.  Each peripheral widened further (~25bps) by its markets close, Spain’s borrowing costs closing just under the 6% important level.  A nasty back-end ensued in Europe as the composite fell to a 3% loss, an impulsive U.S sell off followed with none of the usual post-Europe close buying visible. 

What’s ugly about the whole day is the ease support was sliced through today, (Feb peak, May ‘11).  After just pointing out dip buyers rarely come out immediately following a big breakdown, the losses extended today as buyers were nowhere in sight.  SP slid all the way to SP1358 and through 50MA as well.  You don’t see this type of action often.  Although SP had already slipped through SP1370 by noon, individual growth stocks didn’t get licked till afternoon when volumes/action slowed down. This seemed more characteristic of no buyers present and a handful of sellers hitting the thin bid columns.

All in, the symptoms have been building for an ill looking day/week. (China hard landing?, NFP# signalling an economy rolling over?, Euro crisis returning with vengeance?.  A medicine for support failed with intraday technical breaks SP/ES/ETF’s).  Market needs to close over SP1370 by weeks end or this could be a prelude to a longer corrective phase as technical damage will be present.  The ‘macro’ question marks above all have a ‘fix’ eventually (via eco’ data & Euro external interventions/EFSF/ESM, even SMP buys or internal gov’t policy).   The technical equity 'fix' depends on those sidelined during the rally coming in on this week’s impulsive, poor price action.   Any immediate bounce will likely struggle to sustain itself with only fast traders aboard and without ‘fixes’.