Overnight and In to the Open

As speculated Monday, Commodities recent relative strength seemed to indicate that China may come out with a stronger than expected Flash PMI reading, last night they did exactly that with a 5 month high, still that's 9 months of contraction at 49.5, but the manufacturing output index was at a nine month high showing some strength within the index.

You may have also heard that yesterday Moody's didn't strip the Aaa rating of Germany, the Netherlands and Luxembourg, but did cut the outlook to negative which is about as close a you can come to a downgrade without actually downgrading the 3 Aaa rated countries.

Spain has also announced if the ECB doesn't return to their SMP bond buying program that has effectively been shut down for about 5 months and in effect, support Spanish yields as they climb higher in to the stratosphere, Spain may be forced to seek a full blown sovereign bailout just as we predicted when the banking bailout was first announced months ago. In light of that news, the meeting between the Spanish Economic Minister and the German finance minister today is being closely watched for any developments.

Further deepening the problems in Spain as Germany received warning from Moody'd yesterday that their Aaa status may be revoked if thy keep bailing out countries, Spain's region of Catalonia is now looking for bailout help from the government, this is a large region responsible for about 320% of the country's output. Almost overnight Spain seemingly went from "The weak state that holds all the chips" to "They're on their own".

As for the EUR/USD, it lost a little ground overnight.

Here's what ES looked like...fairly flat, but maintained in the area...

 From yesterday's 4 p.m. close to the European open at the green arrow.

From the European open to present...

We'll be watching the short term charts to see if they move their positive divergence dividing lines created yesterday. Thus far the market is on the same trajectory it started late yesterday afternoon after entering the large bear flag (just barely).

Updates on the way