Europe is smoldering like a fine cigar. It will take a while to burn to the end, but make no mistake, the whole Eurozone is burning.

In order to solve the mess that is the European financial system, a country will inevitably have to leave the Euro zone.

In the wake of one of the most volatile years ever for stocks, safety will be a key theme among investors in 2012.  

If you're asking yourself if you should also be selling, you should think about the people who are selling right now...

The euro crashed again yesterday. After a brief period of stabilization, the euro formed a bear flag then broke decisively to the downside.

Yesterday stocks fell on "European pessimism" and that's after stocks rose Friday on "European optimism." But nothing happened over the weekend to change Friday's viewpoint...

A 32% interest rate is unheard of in a normal market. But as many investors and traders understand, the market is far from normal these days.

If you're anything like the average investor (and I sincerely hope you're not) then you were once again fooled into bullishness by the non-news of the non-event coming from the Euro-zone.

While I believe we are headed higher over the next three weeks, the bears have a funny way of changing the tide of the market without any detection.

Here are three reasons why no one cared about a 15 nation downgrade threat.

Bank stocks, and the other indices for that matter, will have to overcome some heavy bearish news today.

But like curing a hangover with "the hair of the dog" this central bank gift will do more harm than good in the long run.

A liquidity increasing strategy was recently introduced into the system with an interesting side effect.

Considering everything that has happened over the course of the past quarter I can't really blame investors for being skeptical.

Risk aversion has taken hold of the market as investors became fearful that Europe will implode and that China's economy will begin to slow down.

The concern over Italy and the Italian bonds has taken the euro lower. And generally speaking a weak euro is bad for the stock market.

Italy, Greece, Portugal and Spain are all in big trouble... Fortunately for you there's a great way to profit from their unfortunate mess.

The stress in Europe will not go away any time soon. Traders from Europe remain on high alert, and the market is likely to be just as volatile this week as it was last week.

"Debt crisis" and "bankruptcy" have become commonplace terms in most of Europe. And it's not just local businesses that are underwater and can't make interest payments either; it's countries.

One area of the market that has seen unusual strength this week, despite a horrendous distribution day for most other assets on Wednesday, is...

Wednesday's large decline was the result of only one thing: the higher interest rate on Italian debt.

It seems unlikely that Greece can undo decades of bad spending decisions with a simple bailout by its European neighbors.

The market recovered as buyers supported the 1220 zone on SPX. Financials once again played leader - the big banks have produced incredible swings lately.

All major U.S. indices were down by more than 2% on the session, and once again, financials, which are heavily exposed to a European debt crisis, took the largest loses.

During strong trends, leadership stocks, sectors and indices are often defined by large rises on above average volume and miniscule declines on low volume - while the opposite is usually true during bear trends.

Greek Prime Minister George Papandreou recently announced he would put the proposal to a referendum vote in Greece.

The market and the euro both tanked following the news out of Greece last week.

Financials have clearly driven this rally. And it makes sense - this rally is being built on a bailout designed to help banks.

So when I refer to an uninflatable asset, I'm referring to commodities. I'm also making up a word. It's not in the dictionary.

Good economic numbers and average earnings helped the rally, but for the most part the indices rallied on the bailout rumor.

Every bank stock was higher, and most rose twice as much as the average stock from other sectors.

Bank of America (NYSE: BAC) missed earnings estimates badly, and tech behemoth IBM (NYSE: IBM) came in light on sales.

The latest rally in the market was initiated with optimism that Europe would come up with a plan, quickly, that increases investor confidence, avoids default and recapitalizes banks.

While I don't view Greece as an issue, a slowdown in Europe would be a big deal.

Oil is more useful as an indicator than even stocks because of one thing: business.

October 3rd was the first trading day of the month, and the S&P 500 dropped 32 points. Yesterday, October 31, the S&P 500 dropped 32 points. Coincidence? Absolutely.

From a low of 1,075, the S&P 500 rallied 210 points, closing at 1,253 yesterday. That's a 16.5% gain in a month. And there are some pretty amazing statistics to go along with that gain.

One thing that seems to be missing is the timetable for Greek default. It would be good to know exactly when the Euro-banks have to book the losses.

Earnings season has been a success so far, with roughly 70% of the S&P 500 companies that have reported so far beating expectations.

Caterpillar (NYSE:CAT) was expected to earn $1.54 a share after it warned that the quarter would be weaker back in August. But this morning, Caterpillar posted $1.71 a share and raised its guidance for the rest of the year.

The stock market always seems to believe best and discount the worst. Any reprieve in bad news is taken as good news. Any good news is good news. No news is good news. Sometimes, even news that is bad, but not AS bad as expected is taken as good news.

The risk for Europe is not doing enough. If you give Greece debt forgiveness of 30%, but Greece still can't make its payments, then you haven't really accomplished anything.

Apple's (Nasdaq:AAPL) quarter wasn't horrible. The tech company reported earnings of $6.62 billion, or $7.05 a share, on $28.27 billion in revenue. For comparison's sake, Apple earned $4.31 billion, or $4.64 a share last year, and that was a blowout.

We knew bank earnings wouldn't be good. Analysts have cut their estimates for Citigroup (NYSE:C) several times over the last month, by an average of about 20%. So maybe it's a good sign that Citi beat expectations handily...

Google (Nasdaq:GOOG) knocked it out of the park last night. The company earned $2.7 billion on $9.72 billion in revenue for the third quarter. That revenue number represents a 33% gain over last year.

Apparently Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) may both shed their "bank holding company" status to avoid Volcker rule restrictions and get back to the good ol' profitable trading game.