Over the weekend, I talked about European debt concerns, which again moved to the front page yesterday and pushed the markets lower at the opening.
At issue were worries as to whether Portugal and Spain, and to some degree Italy, may need to be bailed out and if they were able to fund their borrowing needs later on this week. The dollar rallied and the Euro dropped taking the markets along.
A late rebound in the Euro reversed the early trend, and the major indexes slowly recovered but ended up short of the unchanged line. My theme from yesterday “Dollar Strength Equals Equity Weakness” still stands and has the potential for a whole new meaning not if but when the European crisis worsens.
What that means is that Europe is definitely the elephant in the room. Any default by a member country, which I consider a real possibility, will send the dollar soaring and equities tanking. The timing of it is the big unknown.
Again, the S&P; 500 held at its major resistance point of 1,260, which has repeatedly served as a springboard. The picture was very murky in the emerging arena as most country ETFs headed south, but to varying degrees. One of them clearly pierced its long term trend line and will be sold, unless a huge rally emerges by mid-day.