With the discussions around the Greek bailout on hold due to the Icelandic Ash Cloud, Greece CDS continues to drift to all time highs. With 10 billion in funding needs by the end of May, investors are clearly skeptical on the nation being able to secure this financing.

On Wednesday the S&P 500 broke up and out of the short-term ascending wedge pattern on expanding volume. On Thursday there was a small follow through advance on expanding volume, but short-term internals showed weakness, and it looked to me as if a pullback toward the point of breakout was likely.

This week we look at rising Chinese inflation expectations, signs of improvement in the US non-manufacturing sector, revisions to EU 4th quarter GDP growth, Australian jobs growth, and finish with a review of some of the monetary policy decisions announced this week. The overall theme is pretty much one of growth, inflation, and monetary policy; one that will become increasingly interesting this year.

For some perspective on the current state of the stock market, today’s chart presents the long-term trend of the Nasdaq. Today’s chart illustrates the degree by which the tech-laden Nasdaq plunged during the dot-com bust (2000-2002).

Thanks to Alea for pointing us in the direction of this excellent presentation on sovereign debt risks. The full report can be found here.

In early January we highlighted the early warning signal (see here) that was the spiking in various CDS spreads. Well, Greek spreads are back near their January highs and the equity markets are once again ignoring the warnings: