It has been difficult to avoid blowing hot and cold on equity markets this year. On the one hand, companies are delivering stronger than expected results. The global economic recovery is finally coming through into their top line growth. Earnings estimates are still being upgraded, as the following chart shows, and valuations remain attractive. On the other hand, and as noted already, more central banks are tightening. Those that aren't will most likely get a start on this shortly, like the Bank of Canada - and later the Fed.

David Fuller's view There is more than a whiff of deflation in the air within OECD countries. Conversely, the enviable growth of the Asia/Pacific's emerging economies has led to inflationary concerns. The combination is likely to produce stagflation for households in western countries and Japan.

The contagion that I now fear is no longer sovereign debt. That problem certainly has not gone away and will eventually flare up again but at least the formerly escalating crisis in Southern Europe has been checked for a while.

The contagion that I fear today is in stock markets, where investors were already nervous and now we are seeing a delayed reaction to last week's high-frequency trading temporary meltdown. After that fright investors relaxed, briefly, because Wall Street bounced back. However, the fact that we still do not know precisely how it happened over a week later is disturbing.

Markets do not like uncertainty at the best of times and knowing that a mysterious accident occurred once, and apparently remains undetected in terms of the specific source (which firms' H-F trading and why?), investors will understandably conclude that it could easily happen again. Official silence spawns rumours and some are saying that the government knows what happened last week but is not yet willing to comment. However unlikely this seems, it does increase market anxiety. Investors are voting with their feet.

The deterioration evident in global stock market indices is disturbing. I do not have time today to review these patterns but they are all available to you in the Chart Library. For the quickest overall impression, in perspective, I suggest that you start with weekly charts and 200-day moving averages.

I could be wrong but I doubt that events are spiralling into another bear market for leading equity indices. Nevertheless a bear market is what people will fear. There is no shortage of legitimate concerns - ballooning sovereign debt, deflationary pressures, some inflationary pressures, the indictment of Goldman Sachs and potentially other investment banks, a general mistrust of the financial industry, out of control high-frequency algorithmic trading and not least, the deterioration of chart patterns. (See also Mike Lenhoff's comments below.)

On the positive side, we still have very accommodative monetary policies in most countries, not least the USA which will provide the all-important leash effect for global stock markets. Monetary policy trumps most other factors most of the time, as I have said before.

Nevertheless, an increasing number of stock market indices now show tops of at least short-term and often medium-term duration. Closes beneath last week's intra-day lows would add to the recent deterioration. I will do an extensive chart review on Monday but also encourage subscribers to look for themselves.