This morning in Europe there was news of a Portuguese bank default and this sent European and US stock markets tumbling.

The top chart shows the Dow Jones STOXX index of European stocks. You can see that it is already below its 50 day moving average (green line) while in the lower two charts you can see that both the Dow and the S&P are still above their 50 day averages. In the Dow the 50 day average is currently 16,740 while in the S&P it is 1925.

In all three cases you can also see that even a drop as far as the rising 200 day moving averages would not disturb the rhythm of the bull market. Such a drop would be comparable in size to several recent ones and smaller than several which have taken place on the way up from the 2009 lows. That said, a drop even as far as the 200 day moving average would be a substantial down move from current levels and so it worth considering the odds that such a decline is underway.

As I remarked in my last update my Lindsay analysis tells me that the US stock market is at levels and within the time frame where a major top could easily develop. Several distinct 3 peaks and domed house formations suggest that a top of potentially major importance occurred on July 3. And the 15 year and 33-34 months time projections also point to the same conclusion.

Nonetheless, I don't think it pays to fight the world's central bankers and their QE programs. So I going to wait for the Dow and the S&P to drop below their 50 day moving averages before I start contemplating a drop to their 200 day moving averages (at 16,175 and 1835 respectively).

I will say, however, that the European Central Bank has pursued a wrong-headed, far too stringent monetary policy for a long time now. I think it will take a drop in the STOXX to its 200 day moving average or below to pry the ECB  away from its current foolishness. But when the light finally does dawn on Draghi, the ECB president, there will be a huge rally in world stock markets and a big drop in the Euro currency.

Looking at today's action in the US stock market one can find evidence that the bulls have not yet had their confidence shaken. The US stock market opened at its low, the low which was seen in European trading, and so far has retraced almost all of its overnight loss. The first sign of trouble in the US markets would be a drop all the way back to or below today's low.