Lately, we have seen the markets continually take their risk off the table (sell-offs), and then put it back on the table (rallies). With this kind of volatility, it's very difficult to figure out where things might be going.
One way to help us figure out general market trends these days is to accurately gague political distortions in the market. For example, every time Europe even hints at good news, there is a large market rally. Subsequently, every time there is a hint of suspicion that the E.U. won't be able to figure out the mess it's in, the markets repond by taking risk off the table.
The result was a very volatile market for August, September and October that basically traded sideways when all was said and done. Interestingly, as the Dow Transportation index hit a new low last week not confirmed by the Dow, the next stroke was upward. Now as we sit on top of that stroke, we've seen a 4% sell-off with the likelihood of more on the way a high probability. How can I be sure? Because the E.U. isn't going to deliver any positive news until at least Thursday, and the Asian markets are already down as of this writing. So tomorrow could either trade flat, or stroke down in anticipation of bad news from Greece. I will venture a guess to say that the markets are not happy with Greece's PM, and will stroke down if he isn't thrown out of office in the no-confidence vote being held on Friday.
But if Greece isn't bailed out and defaults, it will hit the market's hard. We are already seeing some significant signs in the financial world that the Greek debt crisis is weighing heavily on those exposed to it directly. But, a Greek default this quite possible is the best-case situation as this is the only way that Greece and the rest of the world will begin to deal head-on with the real financial problems we are facing. If the bailouts continue, we will just be kicking the proverbial can further and further down the road. It might make life more bearable now, but it will make life a whole lot harder later on.
One correction in the chart below is that the Force line of the ADX is sitting at just below 20. This is ominous, but doesn't indicate a trend developing to the downside. If it were above 20, then it would indicate a trend.
One way to help us figure out general market trends these days is to accurately gague political distortions in the market. For example, every time Europe even hints at good news, there is a large market rally. Subsequently, every time there is a hint of suspicion that the E.U. won't be able to figure out the mess it's in, the markets repond by taking risk off the table.
The result was a very volatile market for August, September and October that basically traded sideways when all was said and done. Interestingly, as the Dow Transportation index hit a new low last week not confirmed by the Dow, the next stroke was upward. Now as we sit on top of that stroke, we've seen a 4% sell-off with the likelihood of more on the way a high probability. How can I be sure? Because the E.U. isn't going to deliver any positive news until at least Thursday, and the Asian markets are already down as of this writing. So tomorrow could either trade flat, or stroke down in anticipation of bad news from Greece. I will venture a guess to say that the markets are not happy with Greece's PM, and will stroke down if he isn't thrown out of office in the no-confidence vote being held on Friday.
But if Greece isn't bailed out and defaults, it will hit the market's hard. We are already seeing some significant signs in the financial world that the Greek debt crisis is weighing heavily on those exposed to it directly. But, a Greek default this quite possible is the best-case situation as this is the only way that Greece and the rest of the world will begin to deal head-on with the real financial problems we are facing. If the bailouts continue, we will just be kicking the proverbial can further and further down the road. It might make life more bearable now, but it will make life a whole lot harder later on.
One correction in the chart below is that the Force line of the ADX is sitting at just below 20. This is ominous, but doesn't indicate a trend developing to the downside. If it were above 20, then it would indicate a trend.
