Sunday, November 6, 2011


So Europe is saved once again, and the market celebrates. This is about the 25th time Europe has been saved in the last few months, and all it took this time was for Greece to cancel its referendum on accepting a bailout. Of course, there are still plenty of uncertainties, and no one seems to really believe we are near the end of the European ills, but we have some short-term clarity, and that is all that the buyers need.

The bulls had the extra benefit of a bullish setup to help matters, and that helped to deliver solid gains on good breadth. All major sectors finished positive, with oil, gold and commodities leading. Retailers, which were under pressure early, reversed strongly during the day, and banks improved as well.

The big question now is whether we can gain further upside traction. We have the monthly jobs report in the morning, which will help to set the tone, but expectations are low, and a poor report probably won't have much impact.

Technically, we are heading into some resistance at the 200-day simple moving average of the S&P 500 at 1275 and then the recent highs at 1290 or so. We have been making very big moves as we swing around lately, and it is very easy to underestimate how far we can run once we start moving. We overshot to the upside last week, and we probably overshot to the downside this week. There is no reason to believe that this sort of overshooting won't continue.