Market Summary

Debt is contracting faster than the government can print new money. This has resulted in a deflationary environment and a slowing down of the economy. Stimulus or austerity is the question the G20 was faced with recently and it is evident that the Euro zone has opted for austerity to correct their balance sheet while the US is opting for stimulus. This is reflected in a falling Euro and a rising US dollar. When the dollar rises the stock market falls.

Germany put the retirement-age issue front and center in the EU financial crisis with this saying: “The Greeks go onto the streets to protest against the increase of the pension age from 61 to 63…Does that mean that the Germans should in the future extend the working age from 67 to 69, so that the Greeks can enjoy their retirement?” Spain's government recently proposed raising the retirement age from 65 to 67.

It was a very red week last week in the market and we are now at key support levels. Should the market break below the 1000.00 level on the S&P 500 Index or the 100 level on the SPY there is a chance the market could fall much lower. I think we are at support here and are going to get a bounce. The question is if this expected bounce is just a bounce or a bottom? We will have to get above resistance at the gap noted on the chart below by the highlighted oval at the 106-107 level to move higher. Click on image to enlarge.

Gold is doing only slightly better than the US dollar on the YTD basis. For the week all markets were down with the riskier classes doing the worst. Click on table to enlarge.