Friends,
European leaders reached an agreement on a new “fiscal compact” which will begin to address the structural economic problems in Europe including stricter rules on budget deficits and greater consequences for those who break those rules. The framework for the Eurozone bailout mechanism was unveiled which includes allowing the temporary EFSF to join with the planned ESM to provide the potential “bazooka” that will be needed to provide the necessary lending capacity to deal with the problem. 26 out of 27 countries said they are open to the new treaty, with the UK and David Cameron being the only one to say “no thanks”.
Whether this is exactly everything that traders wanted to see is unlikely, but it does seem to take a “Lehman Event” off the table, and that is a good thing. Stocks responded positively as the Dow Jones Industrial Average was up 186 points to finish the week at 12,184. The S&P 500 was up 20 points to close at 1255. Gold was up $1.80 to finish near $1715 and oil was up $1.38 per barrel to close at $99.72 WTI. We still are somewhat in no man’s land as resistance on the S&P 500 is overhead at 1265 and support is down near 1220. It will be interesting to see if traders will now put the Eurozone to the side for a couple of weeks and focus on year end performance. Maybe we can take the crazy headline volatility off the table for at least a short while. We can only hope.
In the meantime, it is not too late for Santa to load up his sleigh, but we need to get through the 200 day moving average on the S&P and put some pressure on the underinvested money managers as they scramble to catch up. There were some positive developments this week, although we are never sure what will truly get implemented over there in Europe. Let’s hope the last few weeks of the year can build on the hope that the worst fears have been alleviated over there and things are not that bad over here.
Have a nice weekend everyone.
