Spain and Italy turn against Greece over reform efforts fearing that irresponsible Greece will drag the EU down.

Spain and Italy turn against Greece over reform efforts fearing that irresponsible Greece will drag the EU down.

The Market Oracle said, ”U.S. Housing Bear Market Resumes in 2011.” In the current 60-year cycle which began in 1954, the final “hard down” phase began in 2007 -- right on schedule as this was 7 years from the cycle’s anticipated bottom in 2014.

Dennis Slothower is another of the world’s leading technical analysts whose readers completely avoided losses during the disaster that was 2008. Now he’s issuing another dire warning. His technical indicators suggest that the market manipulation we’ve seen over the last several months is about to come to an end…and that means thousands of investors are about to get clobbered. This big correction could begin as soon as May 31st.

The economic effects of the U.S. defaulting could be "potentially catastrophic," Dimon said at a dinner for the University of Colorado Denver Business School this past week. The U.S. is the financial linchpin of the world, and "It will dwarf Lehman," said, referring to the 2008 collapse which was the beginning of the global financial crisis of 2008.

CLSA's Russell Napier pointed out in his recent prominent note; " investors are better off watching from the sidelines." He further explained: "A risk to revelation would send equities sharply lower. With equities near bubble valuations, based on cyclically adjusted PE, a failure to reflate risks major downside." His outlook is that first we will see another major deflationary shock, following which the Fed already boxed in a corner, will have two choices: let major financial institutions fail, or proceed to monazite outright. Regardless of which outcome is picked, Napier's target for the S&P, which just happens to coincide with that of Albert Edwards, is not pleasant for the bulls: 400 (or somewhere in that vicinity). And that will be the true generational buying bottom.


For the first time since the Great Depression, government payoffs to socialists in America exceed tax receipts. All this week, the FOX Business Network will explore the idea that Obama has made America a nation of takers, instead of makers. Obama socialist media staged demonstrations against American Special Forces in Afghanistan because the Taliban is loosing. Obama’s supporters set up the cameras and had the Taliban supporters’ march directly at the camera's making a dramatic news clip. It was obviously staged and shown last Wednesday and Thursday. Obama also called for the destruction of Israel last week by demanding their return to the indefensible borders of 1967. If he chose 1944 instead he could not have been any clearer about his hate for Israel. Most leftists hate Israel now, but remember the Leftist National Socialists in Europe (NAZI) in 1939 were on the rise and no different than Socialist dictators in Venezuela, Cuba, Libya, Syria, Iran, or Rwanda today.

World Markets:
Belgium had the outlook on its debt rating lowered to negative at Fitch Ratings, which joined Standard & Poor’s in saying that political deadlock complicates efforts to cut the euro area’s third-highest debt load. Belgium needs to reduce its budget deficit to less than 3 percent of gross domestic product next year and balance its books by 2015, as agreed with the European Commission. Belgium’s debt load swelled to 96.8 percent of GDP at the end of 2010. That’s the third highest among the 17 nations sharing the euro, behind Greece and Italy

More than a year after European policy makers approved a 750 billion-euro ($1.1 trillion) bailout blueprint to stem the sovereign crisis, bond yields in debt-laden peripheral countries are at record highs and officials are floating plans to extend Greek repayments. Greek and Irish bonds led declines in the securities of the most indebted nations, while the cost of default insurance rose on concern that the region’s fiscal crisis is deepening. Italian bonds dropped after the nation’s credit-rating outlook was revised downward from stable to negative by Standard & Poor’s on May 20. Yields on 10-year Greek debt rose to a euro-era record, while those on Spanish and Portuguese bonds also climbed. German bund yields fell to a four-month low as a report showed European services and manufacturing growth slowed in May by more than economists predicted.

Manufacturers in Europe and China hit the brakes this month on price pressures as tighter policy measures to control inflation began to bite, as new Monday data indicated. Preliminary purchasing managers’ surveys pointed to slower economic growth in the euro zone and in China in the second quarter. Growth in the EU’s dominant service sector also slowed more sharply than expected.

Spain and Italy turn against Greece over reform efforts fearing irresponsible Greece will destabilize the EU.
When Greece’s financial decision makers were summoned to secret talks at a Luxembourg castle by their euro zone partners this month, they did not expect it would be Spain and Italy, as opposed to Germany, that would take the lead in upbraiding Greece for not pushing faster on privatization and tax overhauls. Spain and Italy were furious and accused Greece of threatening to bring contagion back to their markets. The Spanish Socialist party since then had its worst electoral setback in more than 30 years.

The Fed is scheduled to stop purchasing Treasuries in June, reducing its injections of money into the world financial systems. Japan already entered a new recession due to the earthquake in the first quarter and Europe’s debt crisis is deepening. A drop this month wiped out all the gains since mid-March in the Standard & Poor’s GSCI Index of 24 commodities and sent the MSCI World Index of stocks down 3.37 percent after dividends.


US Economic Highlights
Past Week
NY Manufacturing activity in May plunged to 11.9 from 21.7 last month. Terrible
Housing Starts in Apr fell to 523K from 549K last month. Terrible
Building Permits in Apr fell to 551K from 594K last month. Terrible
US Industrial Production stopped growing in Apr after increasing 0.8% last month. Terrible
Capacity Utilization Apr fell 76.9% from 77.4% last month.
FOMC Minutes May indicate QE2 is being phased out.
Existing Home Sales Apr 5.05M down from 5.09M last month. Bad
The Philadelphia Federal Reserve Bank said its business activity index slumped to 3.9 from 18.5 in April. It was the index's lowest level since October 2010. Terrible
Leading Indicators Apr -0.3% down from 0.4% last month. Terrible! Two quarters of that would be the definition of another recession.

This week
May 24 10:00 AM New Home Sales Apr
May 25 7:00 AM MBA Mortgage Index 05/20
May 25 8:30 AM Durable Orders Apr
May 25 8:30 AM Durable Orders -ex Transportation Apr
May 25 10:00 AM FHFA Housing Price Index Mar
May 25 10:30 AM Crude Inventories 05/21
May 26 8:30 AM GDP - Second Estimate Q1
May 26 8:30 AM GDP Deflator - Second Estimate Q1
May 26 8:30 AM Initial Claims 05/21
May 26 8:30 AM Continuing Claims 05/14
May 27 8:30 AM Personal Income Apr
May 27 8:30 AM Personal Spending Apr
May 27 8:30 AM PCE Prices - Core Apr
May 27 9:55 AM Michigan Sentiment - Final May
May 27 10:00 AM Pending Home Sales Mar


Market Outlook May 24, 2011
The stock market has now broken the lower resistance line and did not bounce above it on Thursday and fell Friday. With QE2 ending there is less chance of a bounce. On a cashflow (not price basis) there was no new high after the last breakdown and thus a head and shoulders sell signal formed already in “Cash Flow” and is becoming apparent in price action now as well. That is why we are not in the market at this time. This week is critical if the market is headed lower as downward capitulation is more probable at the 50 DMA line that will become the new upper limit of the trend line.
http://finance.yahoo.com/q/ta?s=%5ENYA&t=6m&l=on&z=m&q=l&p=m20%2Ce50&a=m26-12-9&c=


World recovery is still a political myth. See:
http://www.bloomberg.com/apps/quote?ticker=BDIY:IND
Click on the 3yr chart and see the low flat-line forming. This was GE/MSNBC/Pravda’s main chart for following China’s growth until it showed stagnation instead.

Asian markets were flat last night. China down –0.3%, Hong Kong up 0.1%, India up 0.1%, and Japan up 0.2%.

European markets are down sharply this morning in a range of about 0.1% to 0.5% half way through their day.

US pre-market futures are up today at about 0.3% at 6:30AM EST.