I was talking about the possibility yesterday that we could see a major bearish reversal, and we may be looking at that starting now, though a visit to 1185/90 support on ES doesn't become a likelihood until the ES rising channel support at 1240 is broken, and that's holding on the first test so far.
How serious is this move overnight? Potentially very serious indeed. It has been triggered by Italian bond yields moving over 7% and that has been triggered in part by some vey stupid moves by European leaders. Firstly banks in the Eurozone are being very strongly encouraged to mark their weak sovereign debt to market, which means that a lot of them are just reducing or selling out their holdings altogether. Margins on weak debt have also been raised and all this selling has taken italian debt over the important 7% level. Over 7% the debt becomes harder to roll over and Italy is on a slide towards default that may not be easy to reverse. Greece is a small two bit economy that has been a major struggle to rescue. Italy is much bigger and owes an awful lot of money.
