More Echoes From 2011 As European Stocks Signal Trouble Ahead

Tyler Durden's picture

As the mainstream media gets over-run with 'buy-the-dippers' and 'healthy retracement' protagonists with the S&P down a monstrous 1.5% from its highs, it is perhaps worth noting (h/t Doug Kass) that Europe's broad equity market index is now down over 5% from it's peak two weeks ago (as is the UK's FTSE index). In yet another echo of last year's liquidity-fueled spurt-and-slump, European equity markets (along with US and European credit markets as we have already noted) are sending a warning signal that trouble may lay immediately ahead for US equities. The Euro-Stoxx index has just crossed below its 100DMA for the first time in over 4 months having dropped over 4% on the last two days. Add to this size of margin debt (as we noted earlier) and the ultra-low levels of cash at equity mutual funds and what is now the largest drop since the rally began (an incredible fact that we have hardly dropped more than 2% peak to trough in five months in Cembalest's sweet serenity) may well mean more pain is to come.

 

2011's US vs Europe Equity performance...

and the current 2012 rally's performance...

 

Charts: Bloomberg

(h/t Doug Kass)