We Need Answers From Europe This Weekend
The market closed positive after another midday turnaround. The indices, lately, have had the habit of reversing the opening direction by the close of the day. And most often, the indices opened lower, only to close higher by late afternoon.
To add another confusing wrench into the mess; volume was terrible. The levels of volume this week are extremely low. And considering that it's 1) October, meaning the big boys are back and trading 2) it's earnings season, and 3) investors are supposedly very interested and well positioned before the European bailout - I find it suspicious that volume was average to low this week.
In fact, if we go back and look, volume levels were nearly the same this week as they were in the slow summer months. And during those summer months it wasn't earnings season or a busy time by any seasonal measure. The market was also 10% higher too.
To quote Buffalo Springfield, "There's something happening here. What it is ain't exactly clear."
I think the market doesn't really know either. The move higher since October 4 has primarily been driven by rumors of a European bailout.
Good economic numbers and average earnings helped the rally, but for the most part the indices rallied on the bailout rumor. But with the low volume during the rally, investors clearly are not sold that the bailout will help. Maybe Merkel, the man with the gun over there, told investors to beware; that the bailout would be slow to process.
Today there is no economic data. But it's options expiration, which will throw another wrench in the mix. There's a lot of moving parts to the market, but none of them are acting together. The economic data, good or bad, cannot get a response from investors.
Earnings have generally been good, but it's been a coin toss to see what each stock does after reporting.
The overriding force in the market has been the bailout talks in Europe. But bond investors have been quiet this whole time, and things could get very interesting if they join the fray. No wonder volume is low; even the pros don't want to position themselves heavily until the confusion subsides.
The low volume also means that another big move for the market is coming once the smoke begins to clear and a new trend unfolds.
I still recommend a long bias, but today we added some bearish exposure, just in case.
