The EU has gone over to the dark side by joining with the Fed in another Ponzi scheme which creates new money to pay the interest on old money. That's what the U.S. did with TARP and the EU is now copying with the cooperation of the Fed. The latter has opened the swap window to allow for support of the euro. This drove the euro back above 130 but by the end of the day was back down to around 127. Meanwhile, the bureaucrats running the EU have accused free market "wolfpacks" of attacking European currency and sovereign debt instead of dealing with debt issues and needed reform. The easy thing to do is blame speculators and print money. Remember, the TARP was doled out in two $350 billion packages in October 2008 and again in January 2009. The stock market bottom wasn't until March. Perhaps the learning curve is now shorter? Stock markets loved the band-aid approach over more difficult and time consuming strategies since trading desk views are short-term oriented. So a major short squeeze was launched. Lost in news is more losses from Fannie and Freddie lost more money and need more from you and me. Nevertheless, markets roared higher on short covering and trading desk enthusiasm. Volume was heavy but only 30% or so of Thursday & Friday. Breadth was strongly positive.
The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term. The massive volatility of the past week put the reading as much oversold limiting any new short positions. Per Investopedia: The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended. Despite the massive rally today, the Summation Index is still correcting. It will take another day like today to turn it. Per Investopedia: The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise. The volatility spike of the last week is quickly subsiding with the huge rally in stocks today. Things may still prove rocky. Continue to Major U.S. Markets