Volume exploded at the end of the day as stocks rise more than 4% as European Bank crisis almost hits critical mass. The hot rumor of the day was a major European bank was about to go bust and central banks across the world needed to take quick and decisive action. They did, and the market cheered as prices surge pushing the NASDAQ above its 50dma. Pending home sales helped fuel stocks higher, but the real story of the day was the efforts pushed by central banks to make sure liquidity is available. Day 3 of an attempted rally was solid, but now we need the market to confirm this new rally.
It is quite tempted to be real excited about today’s move. In yesterday’s commentary I remarked we needed to see a day like this. We did get it, but now we’ll need for the market to confirm the rally with a strong price move with volume higher than the previous day. We’d also like to see volume above the 50 day moving average. Friday’s job report could be the catalyst for a confirmation day, but we’ll stay patient.
The actions taken by the central banks failed to do one thing. That is to remove the debt obligations of the European Union countries. While exposure to this debt is toxic, the debt itself hasn’t been liquidated. Until such time the issue created by debt remain and will continue to remain until budget deficits are squashed and replaced by surpluses. How does a politician who wants to get re-elected slash a budget? Now you can see where the conflict of interest comes into the picture here! The debt remains, but that doesn’t mean we can’t see a half way decent rally produced.
Oversold conditions are no longer, but we need a confirmation day to prove this market rally is for real!
