*All index charts, 20 year, monthly candles
Greece
The basket case of Greece is now down around 90% from its 2007/8 peak. A currency collapse/system-reboot, will probably knock a further 7-9% from what remains. So..this index will probably fall below 100 within a year or so. It is a great example of 'what happens to the stock market when the country collapses'.
France
With the break of 3000, a move to 2750 is a given, if that fails..then 2500. A deflationary collapse wave would take the CAC to around 2k - some 30% lower.
Germany
Even the strongest EU nation is now rolling over. First target is 5500 - around 8-10% further lower. If 5500 fails to hold, then 5k. Where it gets REALLY interesting is if 5k fails. If you see a break of 5k later this year, it will mean the DAX is going all the way back to the 2009 lows of 3500.
UK
The debt-mountain that is the UK, is also showing a clear rollover, and we're set to break the next key level of 5200, which opens up 4750. A move as low as 3500 seems very possible if the central bankers decide not to print enough to counter the deflationary wave now underway.
Hong Kong
One of the strongest markets out there, but again, we have a clear rollover.
Spain
Spain is the next basket case EU state that is directly following in the footsteps of Greece. With the break of 7k - I immediately declared 5k is coming...so far we're halfway there. If 5k..fails...then a further 40% to go. Considering the dire economy of Spain with systemic collapse possible at any time, I'm guessing 5k will FAIL to hold. It looks like the IBEX will be 90% down..within the next few years.
Italy
Slightly further behind than Spain on the road to hell, follows the Italian index. Arguably, the current break of 13k, opens the door to a natural move to the big 10,000 level - so there is probably at least 27% to go.
USA - dow'30
Despite the delusion that is usually endemic in the twisted US markets, even the mighty Dow has rolled over. First target remains 11k. Arguably, a break into the 10750/500 range...would lead to a new target low of 7500/8000 within a few months.
Japan
The Japanese market had been trying to put in a bullish flag, but its failing too. It remains an ugly market..one that has been in terminal decline for over 20 years. A move to new lows of 6500 seems very possible late 2012/ early 2013.
China
China remains strangely stable compared to other world markets (are the communistic overlords meddling even more than the US PPT/Bernanke?). Considering the wider 'will China soft land?' economic concerns, a move down to 1750 seems very viable - that's around 20%. A deflationary/housing collapse wave would likely take this market back to the ultimate psychological support level of 1000.
Summary
World indexes lost almost 3% on Friday alone (see VEU chart below). May was an ugly month, and June is already off to a bearish start. I'm guessing we see some further losses next week, but some kind of multi-week bounce into late June. July/August will be critical in whether we see the Bernanke (and other central bankers) initiate big enough QE to fight off a deflationary collapse wave.
I'm guessing they will leave it too late, and besides, the track record of the bankers is always reactionary, rather than peremptory. I have other thoughts on the wider macro-economic situation, but I'll leave that for another day. Suffice to say...the notion the USA is somehow immune to the ongoing recession in Japan, the EU/UK..its nonsense. The USA will weaken as the year progresses.
(VEU) - FTSE - world index (ex USA)
Deflationary collapse...is it 2008 all over again?
The VEU chart is warning exactly of such an issue. We have the exact same style of chart pattern, only the scale in price/time is different. A break under 35.0 will be the last warning the permabulls get.
For the US markets, a break under 35, would probably mean Dow 8k, Sp'800s, with VIX 60+. In terms of time, such low levels would probably occur no later than October of this year.
More on Sunday.