Stocks and commodities have stabilized a bit this morning as some of the knee jerk panic selling has subsided for now. The situation in Cyprus remains uncertain, however, opening up a performance gap between the US and Europe. Here’s the latest. After yesterday’s big selloff and wide rejection of the tax on deposits. European finance ministers suggested the country reconsider the impact on small depositors. Apparently a vote on the bailout deal won’t be held today as policy makers go back to the drawing board. Latest rumour is that deposits under €20K would not be taxed, €20K-100K would be taxed at 6.75% and over €100K would be taxed at 9.9%. Regardless, a tax is a tax and having opened this Pandora’s Box, it’s going to be hard to convince people across Europe that their saving are not also at risk of confiscation. Another wild card in all of this is Russia. It was supposed to play a role in the bailout and had previously loaned money to Cyprus to keep it afloat. On Thursday, EU President Barroso is expected to travel to Moscow to meet with Prime Minister Medvedev and possibly also President Putin. Oh to be a fly on the wall at those meetings considering that Russians are on the hook for a big chunk of the Cyprus bailout tax. This morning finds US stocks and US crude oil trading slightly higher and European indices and UK crude trading slightly lower again. With political and financial risk in the Eurozone apparently on the rise once again, and so much of the goodwill and credibility gained over the last year severely damaged, we could see this spread in performance grow over time. In overnight action, the Australian market sold off again and broke down through 5,000 after RBA minutes indicated that previous interest rate cuts are still working their way through the economy and that while open to further cuts if needed it remains on hold for now. This was before the incredible Australian jobs report put an exclamation point on the shift into neutral. The Nikkei rebounded as focus shifted back to this week’s transition of power at the Bank of Japan. India’s market retreated despite an interest rate cut on news that one of the parties in the ruling coalition, the DMK party, is pulling out, putting the coalition into a minority situation. This could increase political uncertainty in the country and raise speculation that a federal election currently scheduled for next year, could be accelerated. In currency markets today we are seeing general consolidation. Resource currencies like CAD, AUD and NZD have given back some of yesterday’s gains. GBP continues to climb on relative haven attraction while continental currencies such as EUR, SEK and NOK continue to weaken. Most importantly, gold remains above $1,60/oz, building on yesterday’s breakout, which indicates that traders risk assessments have changed significantly this week, which could impact market trends for some time to come. Economic News Significant economic announcements released overnight include: India interest rate decision 25 bps cut to 7.50% as widely expected UK consumer prices 2.8% in line vs previous 2.7% UK retail prices 3.2% vs street 3.3% UK producer input prices 2.5% vs street 0.8% vs previous 1.8% UK producer output prices 2.3% vs street 1.8% vs previous 2.0% Germany ZEW econ sentiment 48.5 vs street 48.1 Germany ZEW current situation 13.6 vs street 6.0 Italy industrial output (3.6%) vs street (5.6%) and previous 7.4% Cyprus vote on bailout package US housing starts 917K vs street 915K vs previous 890K US building permits 946K vs street 925K vs previous 904K Corporate News Lululemon cut its Q1 revenue forecast to $333-$343 million from $350-$355 million, blaming a shortage of fabric for its signature black yoga pants. Boeing received an order for 175 737 jets from Ryanair with a list price of $15.6 billion. North American indices US30 probed down toward 14,360 before rebounding toward 14,480. It continues to struggle with an overbought RSI and 14,500 with additional resistance possible near 14,565 and initial support near 14,425. SPX500 bounced up off of 1,535 toward 1,555 but continues to face stiff resistance at its 2007 high near 1,565. NDAQ100’s selloff was short lived as it bounced off of 2,755 and quickly retook 2,780 and has settled back in near 2,800 with next resistance near 2,815, 2,830 and a measured 2,860 US SmallCap 2000 successfully retested 935 as new support and has rebounded toward 950 with resistance in place near 955 then a measured 975. Canada60 continues to bounce around in the 725 to 745 range with yesterday’s global stock selloff cushioned by the rally in gold and US crude oil. European Indices UK100 is stabilizing near 6,460 but with the 6,480 support it took out yesterday becoming resistance, and a negative RSI divergence, it remains vulnerable in the near term with next support near 6,385 then 6,240. Germany30 successfully retested its 7,900 breakout point as new support keeping its uptrend intact for now with resistance in place near 8,000 and 8,080. France40 is holding steady on its key 3,800 support/resistance level after dipping down toward 3,750 yesterday. Resistance appears near 3,880. RSI faltering short of 70 suggests upward momentum slowing leaving index increasingly vulnerable. Italy40 remains under distribution, falling in a step pattern. Current channel resistance appears near 16,250 but it has been unable to retake 16,000 either. RSI remains under 50 keeping downward mo intact with next support near 15,740 then 15,600 and 15,400. Spain35 has been unable to fill in yesterday’s gap, remaining well below 8,560. With RSI peaking near 60 indicating a downswing looks underway, next support may appear near 8,360 or 8,100. Commodities today Gold is holding above $1,600, confirming yesterday’s rally. It still needs to clear $1,625 and have its RSI regain 50 to confirm the start of a new uptrend. Silver continues to consolidate in the $28.25 to $29.50 range with next resistance on a breakout near a measured $30.75 which coincides with previous support. Copper is trying to stabilize near $3.40 but remains below its $3.45 breakdown point and in a downtrend, leaving open the possibility of a retest of the $3.25-$3.30 area. US crude is consolidating yesterday’s rally, trading just short of $94.00, the neckline of a reverse H&S pattern. Next resistance on a breakout appears near $95.25 with initial support near $93.50. UK crude remains stuck below $110.00 keeping its downtrend intact with downside support possible near $109.00, $108.00, $107.00 and $105.00 on trend. Gasoline is clinging to $3.00 for now as its rebound stalls with resistance near $3.08 and $3.12 and support near $2.98. Natural Gas is retesting yesterday’s $3.85 breakout point as new support. It may need to consolidate with RSI overbought. Next resistance appears in the $4.00-$4.10 area with initial support near $3.65. FX this morning USDCAD has bounced up off of $1.0175 while RSI held 50 keeping its broader uptrend intact for now. It currently faces resistance ear $1.0300 then $1.0340. EURUSD remains in a downtrend with yesterday’s $1.3000 breakdown point emerging as new resistance. Support appears nar $1.2880 then $1.2660. GBPUSD is consolidating its recent pop in the $1.5060 to $1.5180 range. It needs to clear the $1.5200 hurdle to signal the start of a new upleg.