Spanish Yields Climb Past 6%, Sours Global Stock Markets: April 17, 2012

In spite of stronger-than-expected US retail sales, Spain continues to be the thorn in the side of the EU recovery.  Mostly because Spain is several times larger then Greece and since Spain’s 3 largest banks are almost double the entire Spanish GDP.  Thus, if Spain sinks, or the housing market falls (hammering the banks who hold the mortgages), then the debt crisis in the EZ just goes back to square 1 which is actually -1 for the region.

Spanish 10-year yields surpassed 6% and worries over it hitting 7% are affecting the global market for that is the level most consider it unsustainable with the borrowing costs too high. That means the ECB must come in again but where are they going to get the money to prop up Spain?

If it weren’t for the better-than-expected US retail sales numbers, the market surely would have been in a sour mood. AAPL shares fell the most it has in 6mos (-4%) on the 3rd largest volume day for the stock suggesting those hedge funds which were all in are now both shaken and stirred.  With so many in, any serious drops in the darling of the Nasdaq will send the shares south in a hurry.

Traders should watch out tomorrow as there are a lot of economic announcements on the docket across the board, so expect the market to be volatile.

EUR/GBP – Daily Pin Bar Setup On False Break
After going nowhere for over 6 days, the EUR/GBP finally broke the stalemate breaking the yearly lows, but doing so in emphatic fashion, forming a daily pin bar setup suggesting false break.  We like pullbacks into the .8230 area or just above with tight stops below .8210 targeting .8280 and .8331 should it break the dynamic resistance in the daily 20ema.

Watch for bullish price action triggers on the 4-hour and 1-hour time frames should price drift down to these levels in a corrective fashion.