October 29, 2011 at 11:09 AM EDT
Eurozone Rescue Plan Already Being Trashed?
Saturday, October 29, 2011. 11:00 a.m. There’s something different about this rescue plan for the European debt crisis, and I’m not talking about its more massive size and ambition. With the previous plans of the last two years there was a fifty-fifty mix in the debates and analysis, some willingness to give them a chance. [...]

Saturday, October 29, 2011. 11:00 a.m.

There’s something different about this rescue plan for the European debt crisis, and I’m not talking about its more massive size and ambition.

With the previous plans of the last two years there was a fifty-fifty mix in the debates and analysis, some willingness to give them a chance.

But markets only rallied for a few months each time before the plans unraveled and the crisis popped up again in Greece and elsewhere.

Are pundits and talking heads tired of being fooled?

This time, in spite of much more aggressive rescue measures, a 50% haircut by bond-holders, the promise of increasing the bailout fund from 440 billion euros to 1 trillion euros ($1.4 trillion), actually quite close to what the markets said is needed, I’m hard-pressed to find anyone willing to concede it has any chance of even kicking the can down the road. The report card is already out and it’s a resounding F.

Headlines in the Wall Street Journal this morning: “Doubts Rise on EU Deal” “U.S. Still at Risk”; “For Greeks, Bailout Means Years of Hardship”. 

And in Barron’s: “Misgivings About the Rally”; “Why a Big Rally Can Stir Its Own Kind of Worry”.

In the Financial Times:  “Fears on Contagion Persist”; “Italy Spoils Mood After EU Deal”; “Paris-Berlin Split Widens Over Deal”; “Euphoria Fades In Cold Light of Day”.

Expatica – Germany: “Euphoria Over EU Summit Deal Fades,”

About the only positive assessment seems to be from the rating agencies. Standard & Poor’s affirmed the long-term credit-rating of the rescue fund, the European Financial Stability Facility (EFSF) at AAA. In its assessment the rating agency says, “The outlook is stable.”, and it is almost certain that the AAA rated member governments will provide timely and sufficient extraordinary support to EFSF should it be required.  

To read my weekend newspaper column ‘The Wall of Worry Is Still There But Not As Foreboding!’ click here!

Short-Term Overbought..

As I noted in my column, a number of stock markets were made significantly overbought short-term (above their 50-day moving averages) by the spike up on Thursday.

Will a pullback from that overbought condition be the beginning of another leg down in a resumption of the summer correction?

Or will favorable seasonality, improvements in the U.S. economy, and the turn up by the 50-day m.a., result in the spike-up being the beginning of another typical winter months rally, with any pullbacks from overbought conditions only temporary blips on the charts?

102911a

102911b

Our intermediate-term technical indicators are providing us with quite clear indications of the answer.

Subscribers to Street Smart Report: In the subscribers’ area of the Street Smart Report website, there is an in-depth ‘Bonds, Gold, Dollar, Inflation’ report from Thursday, an in-depth ‘U.S. Market Signals and Outlook report’ from Wednesday, and an in-depth ‘Global Markets report’ from Tuesday.

Yesterday in the U.S. Market.

A mixed day to end a very positive week, no follow through to Thursday’s rally, but giving back almost none of the previous day’s big spike up either.

The Dow closed up 22 points, or 0.2%. The S&P 500 closed up 0.1%. The NYSE Composite closed down 0.1%. The Nasdaq closed down 0.1%. The Nasdaq 100 closed up 0.1%. The Russell 2000 closed down 0.6%. The DJ Transportation Avg. closed down 0.3%. The DJ Utilities Avg closed down 0.8%.

Gold closed down $2 an ounce at $1,744 an ounce, but up a big $105 for the week.

Oil closed down $0.48 a barrel at $93.48.

The U.S. dollar etf UUP closed up 0.1%.

The U.S. Treasury bond etf TLT closed up 1.1%.

Yesterday in European Markets.

European markets also closed mixed yesterday after their big rally on Thursday in response to the euro-zone summit agreement. The London FTSE closed down 0.2%. The German DAX closed up 0.1%. And France’s CAC closed down 0.6%.

Global markets for the week.

A very positive week, mostly coming after the results of the euro-zone emergency summit were announced.

THIS WEEK (October 28)
DJIA12231+ 3.6%
S&P 5001285+ 3.8%
NYSE7803+5.0%
NASDAQ2737+ 3.8%
NASD 1002401+ 2.8%
Russ 2000761+ 6.8%
DJTransprts5011+ 4.1%
DJ Utilities454+ 0.2%
XOI Oils1,276+ 5.9%
Gold bull.1,743+ 6.4%
GoldStcks208+12.5%
Canada12519+ 4.8%
London5702+ 3.9%
Germany6346+ 6.3%
France3348+ 5.6%
Hong Kong20019+ 11.1%
Japan9050+ 4.3%
Australia4411+ 5.0%
S. Korea1929+ 5.0%
India17804+ 6.1%
Indonesia3829+ 5.8%
Brazil59513+ 7.7%
Mexico36708+ 4.9%
China2590+ 6.7%
LAST WEEK (October 21)
DJIA11808+ 1.4%
S&P 5001238+ 1.1%
NYSE7431+1.1%
NASDAQ2637- 1.1%
NASD 1002335- 1.5%
Russ 2000712- 0.1%
DJTransprts4813+ 2.6%
DJ Utilities453+ 3.2%
XOI Oils1,205+ 3.9%
Gold bull.1,639- 2.4%
GoldStcks185- 6.5%
Canada11949- 1.1%
London5488+ 0.4%
Germany5970+ 0.1%
France3171- 1.4%
Hong Kong18025- 2.6%
Japan8678- 0.8%
Australia4203- 1.6%
S. Korea1838+ 0.2%
India16785- 1.7%
Indonesia3620- 1.2%
Brazil55255+ 0.4%
Mexico35020+ 0.5%
China2427- 4.7%
PREVIOUS WEEK (October 14)
DJIA11644+ 4.9%
S&P 5001224+ 6.0%
NYSE7350+6.1%
NASDAQ2667+ 7.6%
NASD 1002371+ 7.7%
Russ 2000712+ 8.6%
DJTransprts4691+ 7.6%
DJ Utilities438+ 1.7%
XOI Oils1,160+ 8.6%
Gold bull.1,680+ 2.5%
GoldStcks198+ 5.5%
Canada12081+ 4.2%
London5466+ 3.1%
Germany5967+ 5.2%
France3217+ 3.9%
Hong Kong18501+ 4.5%
Japan8747+ 1.6%
Australia4269+ 1.0%
S. Korea1835+ 4.3%
India17082+ 5.2%
Indonesia3664+ 7.0%
Brazil55021+ 7.4%
Mexico34848+ 5.6%
China2546+ 3.0%
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Next week’s Economic Reports:

Next week will be another important week for potential market-moving economic reports, including the ISM Mfg Index, the FOMC meeting announcement, Bernanke’s Press Conference after the FOMC meeting, and the Big One!, the Labor Department’s Employment Report for October. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.

To read my weekend newspaper column ‘The Wall of Worry Is Still There But Not As Foreboding!’ click here!

Subscribers to Street Smart Report: In the subscribers’ area of the Street Smart Report website, there is an in-depth ‘Bonds, Gold, Dollar, Inflation’ report from Thursday, an in-depth  ‘U.S. Market Signals and Outlook report’ from Wednesday, and an in-depth ‘Global Markets report’ from Tuesday.

I’ll be back with the next regular blog post on Tuesday morning at 9:25 a.m. Have a great weekend!

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