Friday, December 09, 2011

what hasn't happened

There seems to be an emerging consensus that yesterday's EU summit meeting was a partial failure and a partial success - sort of like all the other EU initiatives taken to control a potential banking crisis.

There is an extraordinary conviction among investors and the this half -success, half-failure result was too little and too late, that an Euro zone break up is inevitable and will have devastating, world-wide economic consequences. At least that is what I am reading in the print media and getting from on-line sources.

Here are a few headlines I found within minutes of searching on line for reactions to the summit. They are quite representative.

"Europe's blithering idiots and their flim-flam treaty" - Ambrose Evans-Pritchard, The Telegraph (UK)

"Europe's Disastrous Summit" - Felix Salmon, Reuters US

"Eurozone banking system on verge of collapse" - Harry Wison, The Telegraph (UK)

I think I am on safe ground in asserting that a very bearish investment crowd has developed around this theme during the past few months.

The odd thing is that the European stock markets as well as the US market have rallied today - not by a huge amount - but quite substantially. I also note that the Euro-currency has been trading quietly for the past two weeks in a narrow range a little above its early October lows.

This surprises me, and I think it means that the widely accepted view that a European crash is imminent is wide of the mark. I think the Euro will rally against the dollar from here and that European and US stock prices will advance well above their late October highs.


Market Karma said...

This is a great point that Carl makes and I think it is the type of analysis that most people overlook. In the perverse world of trading the markets, probably the most important message is the one that is silent.

Win said...

Yes. Absolutely. I am long and looking to get longer.

Brick said...

On top of that we have a full moon on Saturday buy signal if fundamentals don't explain the continued rally!

Brick said...

Lunar forces in place with full moon on Saturday to lift market higher into year end

kcounty said...

bravo! on a slow news day, i think technical analysis works great, but with such large macro economic decisions ahead (or even the threat of) makes market forecasting tough.