We have a technical formation (see chart above) that can mean a move that has been exhausted. The EU crisis seems to be fairly settled in the minds of investors- although there are no details yet. The "perception" is that it may be over. The volatility has collapsed in the market as measured by the VIX. It has gone from 48 to 25 in about a month. The earnings are mixed to neutral. We have gone from a near "Bear Market" to positive for the year in under 30 days. It appears that the world changed completely during this time frame. It is hard to believe. Maybe the original fear and selling was unfounded and everything will be OK or this is a temporary reprise. I don't think anybody is really that surprised that The EU was going to get a bailout. Bankers protect their banks at all cost. What concerns us is that their really appears to be systematic problems. Now that the markets appear to have been stabilized, they will begin to argue again and the volatility will probably go up. The technical formation may be ominous. We will play the short with tight stops here. We will keep a neutral stance in our minds. The only question is; Are we going up or down from here.
let's see how the formation unfolds. It certainly reinforces the belief to always buy the corrections as The Fed will always bail it out....until it doesn't work. So far, it seems to be working.
