Thursday morning

Ugly morning in Europe.  CDS blowing up, banks down huge and some are halted, DAX down 4%, CAC and FTSE down about 3%.  SPX futures down 2%, finding support around the 1172 area which I've been eying as a possible entry point on weakness.  Next level is 1152.  As I've been saying for the past 3 or 4 days, it's important to differentiate between an oversold bounce and a sustainable rally.  The 7% bounce from 1100 lows was simply an oversold bounce and it will be important to see consolidation and retest levels of support before we can have a healthy rally above 1200.  Also important to realize that other than a short selling ban and an uneventful meeting between France and Germany, nothing in Europe has changed.

I remain cautious and will look for any bounce in European indices to lead a SPX relief rally.  Also I want to see the Euro come in to the 141.50-142 level in FXE before I become bullish on commodities. I'm surprised the Euro is not weaker this morning, down marginally to 1.437.


8:30 data:  Initial jobless claims missed expectations by 8k to 408k.  July CPI +0.5% vs exp +0.2% prev -0.2%. Annual Core CPI 1.8% from 1.6% vs exp 1.7%.  Depressed growth expectations coupled with higher than expected PPI and CPI point to stagflation - not good for the bull case.

10:00 data: Philly Fed, Existing Home Sales, and Leading Indicators