I finished last Monday's post by saying that it is just a matter of time before European headlines would move markets lower and it took less than a week. In French presidential elections, incumbent Sarkozy lost to socialist Hallonde signaling policy change there which points toward anti-bailout or anti-Keynesian sentiment. Hallonde winning was more or less expected though, so the real market driver was the results of elections in Greece. The two main coalition parties, the ones who have supported the euro rescue and the forced march to austerity, lost badly. This suggests there is now a lack of a pro-bailout coalition government, and without aid to Greece from the IMF, Greece does not pay back loans to European banks. This is the real catalyst that triggered the ES to sell down 20 points as the GLOBEX session opened yesterday.
In light of the negative news, markets have since recovered most of the early losses. It will be important to see how the ES trades as the market opens this morning. Price on the ES will need to move back above 1361 and stay there following the first hour of trading, otherwise weakness will continue. If selling does resume and the ES closes today below 1352, I will expect price to move down to 1330-1331 relatively quickly.
Levels to watch today on the ES:
Resistance above at: 1361-1362, 1365.50-1366.50, 1372-1373
Support Below at: 1350-1352, 1343-1344, 1338-1339
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