"The European Central Bank has reached the limit of its mandate, especially in the use of non-conventional measures... In the end, these [efforts] are risks for the taxpayers.

"It's like morphine, the LTROs provide relief from the pain, but are not a cure for the illness."

~ECB Governing Council member Jens Weidman, May 25.

We have often thought that interventionism is the opiate of the intellectuals.

"Investors pulled $3.05 billion from junk-bond funds globally in the week ended May 23, the most since August."

~Bloomberg, May 25.

"Home prices drop 2% to post-crisis lows."

~Case Shiller, May 29.

"Consumer Confidence Plunges in May"

~Yahoo! News, May 29.

The Conference Board number for May is 64.9, down from 68.7 in April, which is the biggest hit since October. The consensus was for 70. February's 71.6 was the highest in a year.

Note that junk-bond withdrawals and consumer confidence have quickly moved to numbers seen at the culmination of the last crisis--away back last fall.

Does this suggest that current distress is culminating?

Not likely, but it is poised for some relief.

Last year's problems began to be revealed last May and culminated in late September.

Currencies

The dollar has progressed to new highs for the move, as the sovereign debt crisis resumes. The short squeeze on the DX, which is one of the features of a post-bubble contraction, continues. We had thought that the action would briefly pause at the 81 level reached in January. It only spent a few days there and with some drama has popped to almost 83.

And this is the story--drama as the world discovers that last year's "stimulus" is not working. Well, the global economy has been rolling over.

And yet, the establishment continues in its fanaticism that intervention will make a normal post-bubble contraction go away. Unfortunately, the rise in the dollar as well as yields in Euroland insist that it is not going away. Chart on Spanish bond yields follows.

However, last week we noted that the daily RSI had reached 77.7, which was a level that could limit the move. This is now at RSI 80 and that ended the last big rally, which was to 88.7 (for the index) in 2010.

This fits with the Euro now registering a daily Downside Capitulation.

Stability in the Euro would make most everyone think that the pressures are over and Ross's model has been reliable in signaling a rally.

This would fit with our outlook for choppy financial markets through the summer.

As instructive as it is, let's call it a mini-crisis that is close to ending with the dollar at a daily RSI of 80. A major crisis, as in 2008, could culminate with a weekly RSI out at the 80 level. Possibly later in the year.

Commodities

Last week we noted that the CRB was getting as oversold, with an RSI at 22, as at the double bottom last fall. That was at the 281 level and it has dropped to 275 with an RSI at 21. Mainly, this seems to be due to this week's extension of weakness in crude oil and the fresh hit to natural gas. Cotton and sugar have seriously extended their 52-week lows. Cotton has plunged from 115 a year ago to 71 now. Sugar has dropped from 27 to 19.5.

This really confirms that a cyclical bear started from our "Forecaster" signal in 1Q2011.

However, base metal prices (GYX) at 363 have yet to take out last fall's low of 356. At an RSI of just under 30 it is getting oversold enough to limit the move.

The grain's index (GKX) has dropped to 397 and is testing last December's low of 397. Who cares if it takes out the low, but where are the inflation bulls when you really need them?

It seems that most commodities are beat down enough to expect choppy action through the summer.

Stock Markets

Last week, the S&P got down to an RSI of 23 which could be the momentum low for the move. With this week's pressures the index has slumped to 1311, which we take as testing last week's low of 1292.

This will likely hold and general stock markets could be choppy through the summer. Perhaps another new paradigm is developing - - the "All-One-Chop" model?

Other than that, we are looking for a "Typical" summer. Pundits will describe each rise as a "Typical Summer Rally" and each set back will be a "Typical Summer Doldrum".

Gold Stocks Relative to Bullion

• Gold's have generally underperformed since the economy and orthodox investments arose out of the crash in mid 2009.

• Base metal mining stocks outperformed the rise in base metal prices. That ended in 1Q2011.

• The gold sector is preparing to outperform most every sector--on the planet.

Gold's Relative to S&P

Spanish Bonds