part 2

2. We have a bloodbath in financial stocks today mostly in Europe with the surprising momentum coming from UK banks sharp sell off. SPX is testing the extended levels now to 1290 oın a day 6 count which gives us 3 more potential down days. Thereby tomorrows Apple after close will turn the tide at least short term as the target of 390 should be reached Wednesday. The phony stress test of banks was not really convincing but more importantly the sovereign bonds in Europe keep crashing except Germany and France .

We have a classic top building pattern running and the only relief short term will be the debt ceiling agreement on the US side – though that will be phony version as well and actually it should trigger a downgrade but the rating agencies will not dare to do such a thing at least the big ones.

excerpts

1. Europe Imploding (Again): Greek Two-Year Note Yield Surges 213 Bps to Record 35.19%, More Italy Stock Suspensions

2.Bank of America Tumbles To Paulson’s Cost Basis Following Report Bank Will Need $50 Billion More In Capital Cushion

3. Over 3 weeks ago, before Italian treasury spreads blew out by several hundred basis points, and before Italian bank stock trading halts became a daily occurrence, we suggested that the European contagion was shifting to Italy based on Goldman dark pool Sigma X trading. To wit: “Today’s most active names are Banca Monte dei Paschi di Siena, Unicredit and Intesa Sanpaolo. Translation:someone is actively positioning for serious action in Italy shortly.” That someone sure was right, and it is precisely this trifecta of stocks that at last check was halted on the Borsa. Well, based on today’s action at Sigma X, the next, and probably biggest domino may be about to fall: the UK itself, because coming in at position #2, just behind UniCredit, we see Lloyds Banking. And if Lloyds goes, the ones that will follow are Barclays and RBS. At that point, the financial crisis goes global.

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~ by behindthematrix on July 18, 2011.

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