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Europe Gets What It Wants....Merkel Gives In.....

Stock-Markets / Stock Markets 2012 Jun 30, 2012 - 12:44 PM GMT

By: Jack_Steiman


The only person holding back the Eurozone from flooding the banks in need with cash was Germany's Mrs. Merkel. A smart woman who insisted her country would not support efforts to inflate through the printing of dollars to support financially troubled banks throughout Spain, Ireland, Greece, Portugal and Italy. I guess the pressure became too overwhelming as she did cave in and finally supported those efforts to inflate the banks. She'll be grilled hard as her country will now also pay the price down the road, but the bottom line is she did cave in and she did support the efforts. The market ate it up in a positive way.

The markets throughout the Eurozone blasted higher, and thus, so did ours. We closed at the high print of the pre-market futures, and it was all upside from there. The market didn't blast up after the open, but instead, slowly, but quite gradually, inched up all day. Big gains when all were said and done, and most importantly, all of the key index daily charts cleared their 50-day exponential moving averages. That's bullish no matter how you slice it. The bears have no argument. There's no playing spin doctor here. The bulls made the move as the fear of the Fed overwhelmed the bears who felt covering their shorts was the best way to precede.

Fear of the Fed, and world-bank action, has long been the nemesis of the bears, where even the threat of action often causes them to give up their bearish positions. It's not a fair or level playing field, but it's the house that rules, and the house has made up the rules everyone must live by. The bears know the risk, so there's really no one to blame. You know the cards are stacked against you, so if you play, you have to accept it when these events take place against you. The bulls hit a home run today. It doesn't mean the game is over, it's not. However, the bulls have a rally going with their power hitter always waiting on deck.

Yesterday told the tale in many ways. It was very curious how the market rallied so hard late in the day when there really wasn't any significant news. Sure, some nonsense about Mrs. Merkel, but nothing concrete. In fact, after hours, the market was down quite a bit, with the S&P 500 down a five handle and sinking slowly but surely. As the evening wore on, the news hit about Merkel's surrender, and boom went our futures.

It astounds me how the market always seems to know the story before everyone else does. The short covering late in the day was phenomenal. Now the market is telling us that things are likely headed higher after some backing and filling to unwind short-term overbought conditions. The blow through the 50's were powerful, although volume was not confirming. More short covering today than actual buyers. The market quietly foretold the short-term in the last sixty-minutes yesterday. It seems to do that often doesn't it! Never fight a market's message.

The action was powerful today, but it was on very light volume, which is a bit troubling. Can't argue with price, but it would have been best if the whole world joined in the party. Technically, you always want confirmation, thus, it leaves the door open to a head fake. That said, the action was strong because we blew through all the 50-day exponential moving averages. Those levels being 1337 on the S&P 500 and 2889 on the Nasdaq 100. The moves also occurred on gap ups. Many bottom-feeding stocks finally got rolling, such as Abercrombie & Fitch Co. (ANF) and Caterpillar Inc. (CAT) to name a couple. The best percentage moves occurred mostly from these types of stocks, but make no mistake about it, this rally was across the board. Every sector took advantage.

That is a bullish sign as well as the rally wasn't narrow in nature. Again, only volume was missing. Maybe that will come in sometime next week. As long as those 50-day exponential moving averages hold, just mentioned above, the market is in decent shape technically. If we lose them again, it's yet another red flag. 1425 is roughly the top of the wedge, thus, it's not out of the question that we can make our way up there over the next few weeks. No guarantee, but with today's advance through the 50's, it opens the door to that as a possibility, which seemed like an impossibility not too long ago. It looked more like doom was upon us, but the world was saved last night for yet another few weeks, or who knows how long. Use some weakness to unwind those short-term 60-minute charts to do some buying. Keep it simple. Opportunity will present itself shortly.



Jack Steiman is author of ( ). Former columnist for, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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© 2012

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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