Market Montage

It goes without saying the action yesterday was putrid.  From the overnight futures highs the S&P 500 sold off some 40 points to close at the lows of the session.  Normally that would bode for a poor morning but of course the market is zipping higher to another gap, this time upward.   With the exception of days like yesterday much of the moves the past few weeks have come in the overnight market with these gaps, either up or down.  It remains a difficult environment and in essence the market is churning here.  The closing price yesterday was in the same range as prices we saw on May 17th, there is simply a lot of violent action day to day, and week to week.  In the near term, the market has worked off the oversold conditions during the quick move up and at this time the S&P 500 is in the middle of a range it has been moving around in the past month.

There is not much more to add here that has not been said the past few days or weeks – until things calm down and we see an environment more akin to January/February 2012 there is not much to do.  On one side we have a slowing global economy, and the major issues of Europe.  On the other is intervention after intervention.

Very disappointing action considering $125B was just pledged to the global system.  That said (trying to see both sides) the market has come a long way in a week and it is likely the action would have been better if this had come in the middle or beginning of an oversold bounce rather than on the 6th day of it.   But considering where the market was 12 hours ago in the futures market this is a huge move down versus that level.

There is a lot of resistance above in the S&P 1340-1370 range so as I keep mentioning, rather than a V shaped bounce with nothing but air behind it, building a few weeks of sideways action would be the best bet for bulls to create something that lasts in the months ahead.  Bears of course would say we rally to this level, and roll over as we continue to play global "hide the debt".

For those who utilize the IBD system of follow through days we are now on day 6, so that elusive +1.7% day would need to come this week.

As first leaked last Wednesday, and reported on late Friday the Spanish "don't call it a bailout" arrived in principle on Saturday.  After spending many minutes reading through the variables, pathways, and unintended (or intended) consequences of said "don't call it a bailout", my head is swimming.  At this point it seems that either/or/both the ESM/ESFS (rescue funds) of Europe will be used to transfer funds to the Spanish banks.  But not directly.  Rather to the Spanish bailout fund – by doing this it doesn't reduce the debt to GDP ratio of Spain unfairly.  Already Ireland is squacking about renegotiating their terms.. and so it goes.   That said none of this appears to be 100% final other than agreeing that it will be done in some form or another.   Where bondholders get placed in the order of seniority is also causing some consternation.   For those who do not enjoy spending hours reading through this mess, simply keep an eye on Spanish bond yields.   After opening substantially lower (bullish) they actually gave up all those good vibes here in the premarket (bad), which says we remain in Euromess 2010-2012+.   But kicking of cans in all directions continues.  …

Taking a break from the normal as I just saw this story and it is quite amazing!

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