Witch hunt/China/Greece

The continued witch hunt and scapegoating at just the symptoms of the credit bubble and not the disease comes in the context of a market that was very overbought and was due for any excuse to take a rest. To quantify, the RSI in the S&P 500 went 6 weeks straight above 65 for the first time since 1986. With that said, the open ended nature of future lawsuits and the greater possibility of tighter scrutiny of our banking system will have an impact on the financials and their future earnings power. As important for the global economy and its markets is the correction going on in China in response to further steps to crack down on their property bubble. The Shanghai index fell 4.8% after banks were told to halt loans for 3rd home buyers (investors) in cities with large price gains and to tighten the criteria for sales to non residents. Commodities are also down in response. Greek bond yields are breaking out to the highest since 1998.

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