July 11, 2011

Short-term: 1 yellow, 3 red
Intermediate-term: 2 green, 1 yellow, 1 red

Big deterioration on both volume and bad news from Europe. Now it is Italy that is having difficulty financing its excessive spending. Greece/Ireland/Portugal are one thing. Italy/Spain – and soon Belgium/France – are quite another. The eurozone is showing all the dysfunctionality that everyone predicted. Germany imposed a strong currency zone to protect its export sector. And now, it will pay hundreds of billions per year to keep it together. There is never a free lunch.

More on currencies in next post. For now, get liquid or short equities and junkier bonds. We’re going down to test the June lows. This rally since then was bogus. I would guess that the SPY will zig zag down to about 117-122 for now.

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