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Current Conditions:

Fragile low volume trading as markets wait for make or break bailout news from Europe. Markets ripped up late yesterday on news that the EFSF would be expanded to E$ 2Trillion and  used as an insurance policy for the first 20% haircut. Treasuries and Bunds sold off and Crude traded at monthly highs after the announcement.

VIX closed at 31.56.

PPI came in at .8%, 4x the expected.2%

Market Behavioral Analysis:

The markets are all still hostage to news from Europe, and are reflecting an expectation that something will be done.

Keep an eye on the current correlations Euro up means: S&P up, Bonds down, Crude up. The metals are in margin change state.  Limits and margins are being altered in a way that will have downward pressure on prices.

Market directions are subject to change at any utterance coming from Euroland.

S&P is at Pivot 1225 if we can close above the next target would be 1275

The bottom line remains that we are in a generational (Kondratieff Cycle) credit destruction, correcting 50 years of over spending and excessive borrowing. The Fed and ECB are and will print fiat until the conflagration burns through all savers wealth.

Econ News:

Consumer Price Index  due 8:30

Housing Starts due 8:30

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