With a couple of hours left in the trading session, S&P futures oscilated near the intraday lows, broke through Monday's lows, and proceeded to break the ultra-important Greek election/Spanish bailout/EU summit induced support:
Source: ZeroHedge (S&P price is not current).
The actual importance of this "support" goes well beyond the psychological significance of the 1340 level. Rather, the plunge below these intervention-induced tops is a loud and clear scream from the marketplace that, once again, nothing that has been announced is a real solution -- and therefore the fundamentals are actually the same as when the S&P made its June 4th lows at 1280. With no credible plan in sight (and no dreaded Eurogroup meetings until at least July 20th), markets have a couple of weeks to test the lows from early June.
Today's news that the constitutionality of German involvement in the ESM will not receive a decision for at least another three months, and maybe not until 2013, Europe may be in for some real trouble. Markets have been pricing in direct purchases of distressed European soveriegn debt, and a major delay (or complete denial) of said intervention will easily a spark a major sell-off.
Earnings Season Off To Even Worse Start Than Expected
Although Alcoa's (NYSE:AA) earnings beat severely depressed estimates of $.05 per share, the company actually lost $2 million in the quarter if you leave in one-time charges. Profits were 82% lower than Q2 2011.
Advanced Micro Devices (NYSE:AMD) scared the semiconductor space, and at the time this was written it looked as if it would close down about 12%. The report warned of much weaker-than-expected demand in Europe and China.
A global slowdown is clearly in the works, and with central banks (and governments) out of bullets, recessionary fears are starting to pick up steam.
With markets out of centrally planned juice, we've got a lot of downside here. ESM ratification is particularly unlikely over the next several weeks, and peripheral debt markets are deteriorating. Earnings are already corroborating with forecasts of a major global slowdown. With U.S. equities only about 5% near their highs, the Fed will not ease quite yet.
Disclosure: I am short SPY and short S&P futures.