Much like parts of 2009 and 2010 we are gapping up and down substantially each morning. The difference is in those days we usually gapped in the same direction for many days in a row, whereas now its a roll of the dice which way we gap. After a few gaps down in a row, today the direction is up as European markets rally from very oversold conditions and news that Germany’s top court says bailouts are a good thing.
- The Constitutional Court rejected a series of lawsuits aimed at blocking the participation of Europe’s biggest economy in emergency loan packages but said the government must get approval from parliament’s budget committee before granting such aid. “This was a very tight decision. But it should not be mistakenly interpreted as a constitutional blank check authorizing further rescue measures,” the judge told plaintiffs, government officials and members of parliament in the courtroom in Karlsruhe.
- “Today’s ruling should bring some relief to financial markets as a total chaos scenario has been avoided, but it should not lead to euphoria,” said Carsten Brzeski at ING. “The ruling confirms our view that the German piecemeal approach on the debt crisis is not likely to change but eventually the German parliament will vote in favor of a second Greek bailout package and the beefed-up EFSF (euro zone rescue fund).“
As we know ‘free market capitalists’ in the stock market love bailouts :)
Looks like we will open back above that S&P 1175 area – but again technical analysis is a lot less relevant when we’re gapping up and down 1-2% each day on news flow.
Very interesting action that seems counter intuitive. I would have thought after yesterday’s move by the Swiss National Bank to peg the currency, some money would have flowed out of the swiss franc and into gold. That happened initially in the morning but then the yellow metal reversed to close down on the day. This morning it’s down well over 1%. Looking at the chart one wonders if we have a double top?
Chart below does not reflect this morning’s action: