European Sentiment

As we have known for months, the major problem in the markets has been Europe and until Greece recently, which may end the Euro-zone and the French elections, it has been all about Spain. Today is no different as Spanish 10 year yields have crossed above the unsustainable 6% zone which is the same yield that sent all previous PIIGS looking for a bailout, Spain is simply too large to bailout.

The proposed bailout of the Spanish Banking sector, like all other EU rescue plan was good news for about a day, until the world figured out they simply can't afford it, cue the bond vigilantes and a 6+% yield in Spain overnight. Word is out this morning that Spain will nationalize Bankia later today (meaning the bank has failed and is coming under the protection of the Spanish government, if that is not an oxy-moron.

In some potentially worse news, Bank of America's analysis of the Greek situation is looking for a second vote, this time the second place Syriza anti-bailout party is expected to win. This may be good for Greece, to leave the Euro-zone and dump all of their bad debt on hundreds of European banks, but it is about the worst thing that could happen to the EU member states and could bring about their collapse.

Germany has recognized this as the most likely outcome and is now making plans for a orderly departure of Greece from the Euro-zone, but not the European Union (the difference is whether the member countries use the Euro or not). The German leadership is losing support from the German people as Germany has the most invested in Greece and the European Union exists almost solely to facilitate German exports in a free trade zone.

In addition, overnight the Troika cancelled their May meeting in Greece regarding the last bailout, citing political instability, an understatement if there ever was one.

The rest of the day the market will be looking to Greece, even as Spain and Italy now start to regain the spotlight, for any hints of whether the Greek International bonds will be paid, whether new elections look likely and any talk from the ND or Syrzia.

The only thing the market has going for it this morning are these two charts...

 The market has opened and thus far held support from yesterday's hammer.

And there's a potential positive divergence in ES.