November 01, 2011 at 09:32 AM EDT
Too Much Shocking News For Markets To Handle!
Tuesday, November 1, 2011. 9.25 a.m. Markets were shocked by the news yesterday that MF Global, a giant in commodities brokerage and trading, was filing for bankruptcy. The estimated $41 billion bankruptcy puts it at #7 on the list of the largest bankruptcies ever. That the losses that led to the sudden bankruptcy were reportedly [...]

Tuesday, November 1, 2011. 9.25 a.m.

Markets were shocked by the news yesterday that MF Global, a giant in commodities brokerage and trading, was filing for bankruptcy.

The estimated $41 billion bankruptcy puts it at #7 on the list of the largest bankruptcies ever. That the losses that led to the sudden bankruptcy were reportedly related to bets on the European debt crisis, the use of high leverage on holdings, and the use of derivatives, raises alarm flags all over the place.

And now overnight, markets were absolutely stunned by the news that Greece is going to hold a public referendum on whether the government should accept the rescue plan its government officials supposedly agreed to last week.

With the unpopularity of the austerity measures that will be required of the Greek population, a referendum raises serious uncertainties over whether the rescue plan will survive. 

In my Saturday blog I noted that global markets were made significantly overbought short-term above their 50-day moving averages by last week’s spike-up relief rally, making a short-term pullback likely.

But I, nor no one else could have expected these two back-to-back shocks would be the catalyst for the pullback.

Yesterday’s plunge, as sharp as it was , is hardly a blip on the chart. But the shocking news from Greece will likely make for a even uglier day today.

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It keeps my questions of Saturday in the forefront.

“Will a pullback from that overbought condition be the beginning of another leg down in a resumption of the summer correction? Or will favorable seasonality, improvements in the U.S. economy, and the turn up by the 50-day m.a., result in the spike-up being the beginning of another typical winter months rally, with any pullbacks from overbought conditions only temporary blips on the charts?”

To read my weekend newspaper column ‘The Wall of Worry Is Still There But Not As Foreboding!’ click here!

Subscribers to Street Smart Report: In addition to the charts and signals in the ‘premium content’ area of the blog this morning, the regular ‘Mid-Week U.S. Market Signals and Recommendations’ update will be in the subscribers’ area of the Street Smart Report website sometime tomorrow.

Yesterday in the U.S. Market.

An ugly day to end the best month in several years.

The Dow closed down 276 points, or 2.3%. The S&P 500 closed down 2.5%. The NYSE Composite closed down 3.1%. The Nasdaq closed down 1.9%. The Nasdaq 100 closed down 1.7%. The Russell 2000 closed down 2.6%. The DJ Transportation Avg. closed down 2.4%. The DJ Utilities Avg closed down 0.8%.

Gold closed down $22 an ounce at $1,724.

Oil closed down $0.78 a barrel at $92.54.

The U.S. dollar etf UUP closed up 1.9%.

The U.S. Treasury bond etf TLT surged up 4.0%.

Yesterday in European Markets.

Markets in Europe also closed down sharply yesterday. London closed down 2.8%. The German DAX closed down 3.2%. France closed down 3.2%.

Asian Markets Were Down Sharply Sunday Night  and Again Last Night.

The DJ Asia-Pacific Index closed down 2.3% Sunday night, and down 2.1% last night.

The only winners last night were China, New Zealand, South Korea, and Taiwan, and they were up only very fractionally.

Among individual markets last night:

Australia closed down 1.5%. China closed up 0.7%. Hong Kong closed down 2.5%. India closed down 1.3%. Indonesia closed down 2.8%. Japan closed down 1.7%. Malaysia closed down 1.2%. New Zealand closed up 0.1%. South Korea closed up 0.1%. Singapore closed down 2.3%. Taiwan closed up 0.5%. Thailand closed down 1.9%.

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Markets This Morning.

European markets are plunging this morning on the totally unexpected news that Greece may reject the bailout plan it agreed to last week. The London FTSE is down 3.5%. Germany’s DAX is down 6.0%. France’s CAC is down 5.7%.

Oil is down $3.40 a barrel at $88.79.

Gold is down $36 an ounce at $1,688 an ounce.

This morning in the U.S. Market:

This week is another important week for potential market-moving economic reports, including the ISM Mfg Index, the FOMC meeting announcement, Bernanke’s Press Conference after the FOMC meeting, and the Big One!, the Labor Department’s Employment Report for October. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.

Yesterday’s report was that the Fed’s Chicago area business barometer, the Chicago PMI, ticked down to 58.4 in October from 60.4 in September, but remained well above 50, the level that separates growth from contraction by its measurements. And the Fed’s Dallas area business-activity index posted its first positive reading in six months, jumping from –14.4 in September to +2.3 in October, back above its 0 level that separates growth from contraction by its measurements.

This morning’s reports will be out later, the national ISM Mfg Index, and Construction Spending, at 10 a.m. Automakers will be reporting their October sales throughout the morning.

But markets have already turned their focus away from signs of the economy improving and 3rd quarter earnings, back to the European debt crisis after the shocking news from Greece.

Our Pre-Open Indicators:

Our pre-open indicators are now pointing to the Dow being down 250 points or so in the early going.

To read my weekend newspaper column ‘The Wall of Worry Is Still There But Not As Foreboding!’ click here!

Subscribers to Street Smart Report: In addition to the charts and signals in the ‘premium content’ area of the blog this morning, the regular ‘Mid-Week U.S. Market Signals and Recommendations’ update will be in the subscribers’ area of the Street Smart Report website sometime tomorrow.

Non-subscribers: How are you doing so far in 2011? We can help, and at very reasonable cost! Street Smart Report Online provides an 8-page newsletter every 3 weeks, an in-depth 6 page interim update every Wednesday on our intermediate-term signals and recommended holdings, an in-depth 4-page ‘Gold, Bonds, Dollar’ update every 2 weeks, and special reports and hotline updates as needed. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 23nd year. As a bonus for a one-year subscription you will also receive my latest book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information.

I’ll be back Thursday morning with the regular Thursday morning post, at 9:25 a.m. (This blog appears every Tuesday, Thursday, and Saturday morning!).

**** End of Today’s post*****

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