Financials are starting to stabilize after the long trip down.

Watch the bond market. If the drop in fixed-income prices accelerates (and yields rise), the reallocation out of bonds and into stocks could occur posthaste and serve as a catalyst for a more sustained market turn.






Spanish 10-year yields are up by about 20 basis points, to 5.27% -- that's the first increase since last Monday and the largest rise in yields since the first week of December.

Italian 10-year yields are up by 16 basis points.






The grand rotation out of bonds and into stocks might have commenced.

How to play it?

Be short bonds, and long TBT, and be long the asset managers BEN, TROW, LM






Upward moves such as yesterday's are not unusual during the Christmas period near year-end.







The tally of the central bank's first offering of longer-term refinancing was far greater than expected.

The ECB has provided a forceful tool in the form of an unlimited three-year loan to European banks.

The results of the first offering -- the second offering will be in late February -- were far larger than expected, at over 480 billion euros.

I suspect that there will continue to be some skepticism in the markets surrounding the notions:

that the longer-term refinancing operation (LTRO) will loosen up credit availability; and

whether the very nature of the LTRO, which is designed to have the banks save themselves by saving the sovereigns, will continue to suppress interest rates on sovereign debt.

The LTRO bazooka diminishes a Lehman moment in Europe, but there will continue to be a lot of heavy lifting (and discord) in the eurozone in the months ahead.

As a result, the volatility over the last few months in the markets here and over there will continue to be the mainstay.