Friday, November 18, 2011


One of the reasons there has been a wall of worry for this market to climb lately is that there are some very legitimate and obvious issues to worry about. This afternoon, those worries came to the forefront again as Moody's cut 10 German banks on expectations of a decline in government support, and Fitch expressed concerns about U.S. banks' exposure to euro-zone debt.

Those two headlines slammed the market back down after an impressive recovery following a weak open.

The fact that we have this very dangerous and well-known situation in Europe is a big part of the reason the market has been acting the way it has. Market players are worried they are going to be caught by news like we had this afternoon, but when we go for a period when the issues are ignored, then the worries about being left behind start to crop up.

We had a very good example of that dynamic the last two days. We gap down to start the day, because of worries out of Europe, but then the underinvested bulls who are trying to rack up some relative performance start to buy, and before you know it, we are trending back up.

That works out quite nicely until we are suddenly hit by some negative headlines and send everyone scurrying back to the sidelines, where they are ready to repeat the process.

It was quite a roller coaster ride today, but it was interesting to see that we actually had a pretty good theme going for a change on the strength in oil and gas. That was where all the positive action was today, and it goes to show that there is some potential for speculative trading if we can set aside the macro concerns for a little while.