Lately, some European countries have been in the news in regards to their sovereign debt and their ability to pay them.  This is shaking up the markets’ overall confidence.  This made me think about our own deficit.  We are at incredible levels that are just going to get worse without proper planning.

Reuters:

The U.S. debt has grown rapidly with the economic downturn and government spending for the Wall Street bailout, the wars in Afghanistan and Iraq and the economic stimulus. The rising debt is contributing to voter unrest ahead of the November congressional elections in which Republicans hope to regain control of Congress.

The total U.S. debt includes obligations to the Social Security retirement program and other government trust funds. The amount of debt held by investors, which include China and other countries as well as individuals and pension funds, will rise to an estimated $9.1 trillion this year from $7.5 trillion last year.

By 2015 the net public debt will rise to an estimated $14 trillion, with a ratio to GDP of 73 percent, the Treasury report said.

The stock market was down today and the futures market are pointing for a down day start tomorrow too. This market is really starting to get volatile.  Looks like we will test another support level from the February lows tomorrow.

Yahoo AP:

TOKYO (AP) — Asian stock markets tumbled Tuesday, extending a sell-off that sent Wall Street lower overnight as the sliding euro hit exporters amid a new wave of pessimism about the global economy’s health.

Renewed worries about Europe’s debt problems and a shaky euro rattled already anxious investors, who grew more uncertain about the outlook for the U.S. and global economies.

Japan’s Nikkei 225 stock average shed 2.4 percent to 9,526.97 as the yen’s strength against the common European currency hammered exporters.

Hong Kong’s Hang Seng index fell 2 percent to 19,278.05, and South Korea’s Kospi lost 3 percent to 1,556.28. Benchmarks in Australia, Taiwan, Singapore and mainland China also retreated.

The weekend rescue of a small Spanish bank exacerbated investor pessimism about Europe’s financial health. The Bank of Spain stepped in to rescue Cajasur after it failed to complete a merger. It was only the second time Spain’s central bank had saved a regional lender.

The euro’s weakness also unnerved markets. Traders have been dumping the 16-nation currency on fears that massive debts will cause defaults by weaker countries in the European Union.

There was a fight tonight on a little mma event I never heard of before.  Anyways Tim Sylvia fought the strongest man in the world.  Tim Sylvia looked out of shape to me.  Cool thing is the fight is already on youtube.

More important is that we have broken through some technical indicators.  The support level of the 200 day moving average has fallen in both the DOW and the S&P500.  I don’t know if we are going to have a bounce tomorrow or a follow through to the downside.  Either way it is scary because the uncertainty will magnify the volatility in the weeks to come.

Market Watch:

As of mid-day trading in New York, for example, the Dow Jones Industrial Average (DJIA 10,068, -376.36, -3.60%)is below its close on May 7, the day after the infamous “Flash Crash” that saw an intra-day decline of nearly 1,000 points. The May 7 close, of course, marked the low — until today — of the correction that began from the April highs.

In failing to stay above its May 7 close, the market in effect is saying that the Flash Crash was not entirely a fluke caused by a computer glitch or a “fat finger.” A number of technical analysts I follow are considering the failure to be a significant development.

Another major technical support level that is being broken today is the 200-day moving average. Many traders use that average to grade the market’s major trend (as opposed to its shorter-term trend), and with both the Dow and the S&P 500 index(SPX 1,072, -43.46, -3.90%) breaking below their respective 200-day moving averages, a number of technical analysts will declare that we are in a major bear market.

I think Prechter makes a good forecast.

I found this information useful from Dshort:

Is the current market just a repeat of the early 1930s?  Well, we can’t know until it is played out.  However, you can make decisions of whether you want to be in this market right now or later.  If you can, imagine yourself living in 1929 and having your money tied up in the stock market (brokerage account, 401k, IRAs,other retirement funds) then watching it fall 47% in 10 weeks only to see it go back up 48% the following 22 weeks.  At the end of 3 years, the market eventually fell 89%.

Is it possible that history may repeat itself? Of course it can, but no one will know until after it has happened.  You should also keep in mind, if you were able to keep your money in the markets even with this downturn for the next 90 years, you would be ahead even with the current market downturn.