Momentum? The market sold off 10% over a week, then rallied 7% over 4 days, then has been flat for 4 days, rebuffed by the 200 days over and over and over again this week, and then sold off more than -2% today. Where is the momentum, and to which direction?
haha, so you are calling for Dow to be just about at a 12 month high? wake up, the futures manipulation has netted you 800 points in 8 sessions. and you want more? there is ZERO support from SPY 124 to 117.
Italy will never default? that is your thesis? It's not Italy's choice. If no one buys their bonds in January, and they need $100 billion worth of buyers, they will have to default. The only buyer is the ECB, and they don't have the firepower to buy the $100 billion (+ the Spanish debt and other Euro bank debt issuance in 1Q12) unless they start printing money (i.e., QE), which Draghi said this morning that they won't do. So who's got a spare $100 billion? Financials will continue to tank until ECB ponies up. My bet is that they won't pony up until the 11th hour in late January, when it is absolutely clear Italian default is a done deal, and then they will cave and start printing money, buy up all the Italian and other Euro debt, and save the day. But by then the S&P will be at 800-900 range, and everyone will be predicting the end of the world. That will be the time to go long. Not now. The risk/reward just doesn't make sense.
EU already leaked all of the details today, and the market didn't like it, as there is no solution to the near-term issues. In other words, no ECB bond buying or IMF bond buying to bring down yields. Without it, Italy defaults in January as they won't be able to refinance their $100 billion of bonds due that month. It's game over. All week everyone assumed that Eurozone countries would agree to fiscal integration in exchange for ECB bond buying, but Draghi shot that down this morning. The announcement tomorrow is now a non event. More selling.