The picture continues to be mixed from both a fundamental and technical standpoint. The good news is that we might get a resolution this week on both counts. Longtime readers know that I believe corrections are largely a function of time. Today is the seventh day of the correction, so if the correction continues through Thursday we will finally be oversold. If the correction continues that long we might see some of the stubborn bulls give up and relieve the overly bullish short term sentiment as well.
Spreads in Italy are blowing out again this morning and we are nearing the point where Italy will not be able to access capital markets. While this might seem like bad news, it is only under these conditions that I believe reforms will be passed. I believe that if Italy passes reforms, the EU will support Italy and the crisis will largely be over.