I'll touch on the dollar later today -- or maybe next week depending on economic events.
So -- what the hell happened yesterday? There was huge confluence of events in the market.
1.) The EU Commission President stated the EU issues were no longer contained to the periphery. There are a lot of issues between the various countries here that are beyond my knowledge, but Spain and Italy are now having problems with their respective bond yield (their yields are blowing out) indicating investors are concerned about those economies.
2.) The US economic news has been growing increasingly negative for the last few months. This started with the US manufacturing sector, which was hit by the supply slowdown that started in Japan. Then we had the last two employment reports, which were far weaker than anticipated. This was followed by a massive downward revision to first quarter GDP and a weak 2 quarter GDP print. We've also seen consumer spending slow. However, as I noted yesterday, the overall economic numbers show a weak US economy at this point, but not a recessionary environment.
3.) Market participants have uniformly panned the debt deal package as counter-productive in the current economic environment. Once the debt deal was signed, the markets started tanking -- and have been ever since.
4.) Several markets were already through important technical levels, which aggravated the market's weak position and accelerated the selling. This led to computerized sales adding further downward pressure. Below are the charts of the major equity tracking ETFs, which all show technical weakness: