Trading volatile markets and Euro debt problems
This nice rally in October made the case for further upside to the market. The debt crisis in Europe seemed to end with 17 member Eurozone coming to the rescue with a $1.4 billion in aid package and giving a helping hand to Greece to avoid a disastrous situation. But the Greek’s Prime Minister shocked the financial markets by asking for a referendum on the deal. European leader were quick to show their displeasure, saying ” When you are in a crisis you take what is given and not try to save your own skin”.
Though Greece debt has nothing to do with US economy, the same banks who run the stock markets here also are invested in Europe and Greece. When these major players get stressed out they do one and only thing they know: Sell everything and throw the baby out the window.
The world markets collapsed on the possibility that this may unravel the Euro solution and void the deal reached which may force Greece to leave the Eurozone. How realistic these fears may be we just have see. Dow sank almost 300 point and closed below the 12,000 levels. This in turn has created higher volatility in the markets and these are usually signs of a bear market. When VIX is below 20s or in teens it usually signifies bull markets. Here is Louise Yamada talking about market’s volatility and the warning signs:
The markets continue upwards but with weak trend and they are not overbought but in neutral conditions. If a deal comes out of Greece, maybe we will see a rally to the upside. The Feds are going to wrap up a 2 day meeting and Chairman Bernanke is about to give a press conference on the state of economy.