The European situation is worsening as Greece gets closer to defaulting on its sovereign debt. It now seems inevitable that Greece will not be able to stick to its budget-cutting targets and Germany is threatening to withhold further aid unless Greece meets the terms of its austerity package.  The likely effects of a Greek default are not well understood but will certainly lead to a further fall in the markets as Financial stocks are hit and in the worst case could lead to Lehman Brothers like situation where overnight repo markets freeze-up.

The European situation certainly contributed to the end-of-week sell-off but it is also possible that news of a "credible threat" to New York and/or Washington unnerved the markets. With the ten-year anniversary of 9/11 falling on Sunday, an attack over the weekend would certainly cause panic selling on Monday so some traders may have limited their exposure, just in case.

The NASDAQ Composite has fared slightly better than the other major indexes, losing just 0.5% for the week, but the trend is downwards and likely to continue so until support is tested at 2330. A surge above resistance at 2600 would reverse the trend but that seems unlikely until the outcome of a Greek default is known. Adding to the uncertainty is the likelihood that Obama's jobs initiative will be stalled until the debt-commission announces its findings by Thanksgiving.

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How to Receive Breakdown Alerts

By default, we do not send breakdown alerts as the primary purpose of our site has been to identify potentially profitable long positions and many individually directed investors are uncomfortable with going short.

This article makes the case that We Are in a Secular Bear Market that began 11 years ago. It views the bull market that began in April 2009 as 'cyclical' and that we have now returned to the prevailing bearish trend. It makes the case that with households deleveraging, which will continue until the housing market has bottomed, "we expect U.S. stocks to stay in the secular bear market that started in 2000 for many years to come."

If this is true, and the case for it is very strong, there will be more opportunities to make profits on the short side than on the long, as this weeks comparison of breakout to breakdown performance shows.

Should you wish to receive breakdown alerts then you need to go to menu choice Support > Account Management > Update Account and check the "send Breakdown Alerts" box.