A correction serves to wring out the excess bullishness in the market. I wrote late yesterday that my sense was that people were not giving up on their bullish stance, despite the market decline. This was confirmed by the Rydex numbers from last night as traders actually increased their net long stance into yesterday's decline. I strongly suspect that the correction is not yet over.
Italian and Spanish spreads are widening once again after months of tightening. There are no longer any significant programs in place to aid spreads. It will take a significant worsening of the situation before the Germans agree to do more. Unless spreads start tightening on their own we could be in for the next chapter of the Euro crisis soon.