Anytime the markets crash or plunge the way they did yesterday, it is prudent to expect heavy volatile markets for weeks to come. The month of August is usually very calm or tame historically. There is no question that we are in uncertain times when it comes to the debt issues in the United States and Europe.
The United States takes in $2.2 trillion a year and spends $3.7 trillion. That math does not make any sense and will need to really be addressed if the Unites States is going to survive as we known it. Europe is in a bit of a pickle. The European Union is made up of multiple nations, some produce goods and some don’t. The European Union looks like a test project that simply went bad. Eventually, the European Union Union will have to be broken up. Countries such as Germany that actually produce and manufacture products that consumers want cannot keep the Euro-zone together single handedly. Spain, Italy, and even France are simply too big to bail out. The best thing for the world would be a European default. This will come in the next couple of years.
These stock markets are very oversold at this time. Anytime the Dow Jones Industrial Average declines by over 500.0 points in a single trading day on massive volume it will generally mark short term exhaustion selling. Therefore, it is possible to see small bounces in this market at this time. There has been a lot of technical damage done over the past ten trading days. Traders must now watch for the aftershocks that will occur over the next few weeks.