Squawk Morning Briefing: How Do You Say TARP in Spanish?

Financial market relief at from the TARP program, intended to shore up the precarious capital position of U. S. banks, was short lived. Therefore it is wise to question whether an overnight rally that appears to be based on Spanish banks being rescued will be able to persist.

The Euro managed a large gap up open of nearly 130 pips with follow-through into the FibGrid fire line area. It is now close to closing that gap. Meanwhile, as we write equity futures have closed nearly half of their Sunday evening opening gap.

Despite some initial Euphoria, it seems that once traders step back and think about the European situation they are no more sanguine than they were about TARP. However, it still remains to be seen if this current selling will follow the earlier U. S. model and begin making its way to new lows from current levels.

As we address in our Euro video, it is possible that the currency has completed an upward correction and could be turning down. In U. S. equities the most likely case is that their correction up from June 1st lows still needs another leg up to complete a correction. In the short-term however, we’ll remember that five-wave moves down followed by three wave recoveries are what is needed to keep the focus down. Until then, we can wait to see if a correction upward is continuing.

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