Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics

I’ll keep this short since I’m traveling and it’s quite late on Wednesday night right now in Dallas. There isn’t much to talk about other than Europe. That’s all you see on CNBC. Maybe there’s an occasional mention of the latest earnings miss or some other dismissible news item. But the prognosis for the U.S. is quite positive, provided the euro-zone doesn’t send the global economy into a spiral. The reality of a truly global economy is upon us – and all eyes remain on Greece and Italy.

It might surprise you to know that Italy has one of the world’s largest bond markets. So, European banks hold a lot of Italian bonds, which are losing value by the day as buyers flee and yields soar to third-world levels. We have already seen how bad it can get with the situation in Greece. However, the European Central Bank (ECB) won’t pour money into buying Italian debt (like the Fed does to support U.S. Treasuries and keep interest payments low) until Italy passes the austerity package it promised earlier.

U.S. stock investors have been quite patient. It’s obvious that stocks are ready to rally, given a suitable plan to address Europe’s financial woes.

The SPY closed Wednesday at 123.16, which is right about where it was last Wednesday. The 200-day simple moving average again has imposed strong resistance, while the 100-day is providing support. The Bollinger Bands (two standard deviations above and below the 20-day moving average) have converged again, while RSI is back to neutral and MACD and Slow Stochastic appear to be rolling over.

The VIX (CBOE Market Volatility Index – a.k.a. “fear gauge”) jumped over 30% on Wednesday to close at 36.16, which is back above the important 30 mark, signaling elevated fear. The TED spread (indicator of credit risk in the general economy, measuring the difference between the 3-month T-bill and 3-month LIBOR interest rates) continues to be elevated, as it closed Wednesday at 44.41, which is still around its 52-week high. Although not nearly so high as it was during the 2008 financial crisis, it nevertheless indicates elevated investor worry about bank liquidity and a preference for the safety of Treasuries bonds over corporate bonds.

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