As the stock market was ready to take another nasty dive on Tuesday, the Financial Times reported that “EU ministers look at bank aid plans,” and the market recovered in style with the price action easily visible on a 5 minute chart.
“There is an increasingly shared view that we need a concerted, coordinated approach in Europe while many of the elements are done in the member states,” Olli Rehn, European commissioner for economic affairs, told the Financial Times. “There is a sense of urgency among ministers and we need to move on.”
Although the plan is still being written – what else is new – the euphoria truly kicked in, and the KBW Bank index (NYSEARCA:KBE) picked up over 4%, providing the stable ground for everything to move up.
While the above excerpt says nothing new, and everyone knows that a “concerted” effort is crucial to resolving the issue at hand, the only reason why I am writing about this is to highlight some of the wild assumptions that take place in this business.
The very same story was reported later by MarketWatch quoting the Financial Times, but yet another last minute piece was published after the market closed. The article in question was titled “Key reversal day?” and started with an extremely upbeat tone.
Might the stock market have hit a major bottom on the very day that it also satisfied the official definition of a bear market? That distinct possibility is raised by the market’s stunning recovery in the last hour of today’s trading session, which appears to satisfy the definition of a “key reversal day” - a technical event that some technicians believe to be potentially quite bullish.
There’s a disclaimer in there for good taste, that states that a reversal day is not a guarantee, although the irony would be “for the bear market to have come to an end on the very day it convinced many that the bull market was dead.” Who said the bull was alive?
Believe me. Nothing would give me more pleasure than seeing everything resolved and for the market and the economy to resume their way north, and our lives to find stable ground. But to jump up and down about the “stunning recovery” that was based on a story that may or may not come true, is truly baffling. That to me is called “desperation” and these “recoveries” have been the special of the day for a few weeks now.
And anyone with the minimum exposure to current economic events can quickly deduce that what is proposed is yet another patch is an endless quilt.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.