Global markets had been plunging since March on worries about the dangerous eurozone debt and banking crisis and its threat to global economies.
But over the last two weeks they've been rallying quite impressively, even as the crisis in Europe has taken another frightening turn for the worse, and as tomorrow's Greek election neared, with its outcome just as critical and uncertain as before.
The driving force of the rally is obviously that the worse the situation becomes the greater the hope that massive rescue efforts will have to be forthcoming. And with the additional evidence this week of how rapidly the tragedy of Greece is spiraling toward Spain and perhaps even Italy, next week has been determined by analysts as the make-or-break week.
Either governments step in with massive rescue and stimulus efforts or it's a Lehman-type 'game over' for the euro-zone, with potential devastating results for the rest of the world.
I'm not sure the situation is that extreme, but the hype that it is has anxiety through the roof.
Most investors seem to be standing pat with whatever are their positions, short or long, doing nothing either way, as evidenced by the low trading volume. But short-term traders are very active, some betting on the make, some on the break, with the make side dominating so far.
Yet, as evidenced by the many opposing opinions among analysts, and the public statements of participants, the outcome is far from assured either way.
Among the silliest statements was that of Spain's economic minister Luis de Guindos, who in efforts to calm the country said on Friday, "The government is on top of things."
That assurance even as Spain's borrowing costs touched a euro-era record of 7% on its 10-year bonds, the level that forced Greece and Portugal to require massive bailouts, and that assurance given even as the Spanish government is pleading for help and urging Germany to do more to resolve the crisis.
While markets are convinced something massive is in the works, all that European Central Bank President Draghi has said is that the ECB "will continue to supply liquidity to solvent banks where needed", as he has said for months.
Reuters moved markets higher with a report that an un-named G-20 aide told them that "Central banks are preparing for coordinated action to provide liquidity."
But German Chancellor Merkel released a statement Friday repeating Germany's opposition to euro-zone members jointly guaranteeing a broad euro-zone bond, as well as France's recommendation of a "financial stability package". She said the solution is not for Germany to guarantee the debts of other eurozone countries but for an agreement on sweeping new rules for the political union of Europe.
That doesn't sound like it's an absolute foregone conclusion that the G-20 summit meeting this weekend will be successful in agreeing on hoped for massive coordinated action.
Meanwhile, in the U.S. traders are convinced that this week's additional evidence that the U.S. economic slowdown is still worsening will convince the U.S. Federal Reserve to get off its butt and take action at its FOMC meeting next week to re-stimulate the economy.
The Fed has been saying only that it is monitoring the situation and stands ready to take action "if it becomes necessary".
As far as the economy is concerned it seems to be time for action. But with markets now rallying so strongly the Fed may not feel as pressured to act. In the similar slowdowns of the last two summers the Fed waited until not only the economy seemed to be sliding dangerously toward recession, but until the stock market was down 20%, in danger of crossing the 20% threshold into a bear market. The Fed's concern was probably higher two weeks ago before the stock market bounced back in this new rally.
So here we are at another highly uncertain juncture, markets convinced the European Central Bank and the U.S. Federal Reserve will both come to the rescue with substantial additional monetary easing; that eurozone officials will patch up their differences and agree on a major plan to rescue the eurozone no matter which way the important Greek election goes tomorrow; and that the G-20 nations will also decide on a major coordinated global economic stimulus effort.
It certainly all seems needed and likely. But OMG it's a lot to expect and accomplish in yet another weekend of emergency meetings and uncertainties.
With the way markets are factoring expected good news into prices there's even the risk of it being another classic case of 'buying the rumor and then selling the fact.'
There is no way to handicap the outcome. Not even the participants who will be making the critical decisions seem to have a clue. That does not meet my criteria for street smart investing. There are always uncertainties in investing, but this is big-time crazy uncertainty, just as capable of producing big losses in a hurry as further gains.
In the interest of full disclosure, I and my subscribers closed out our downside positions in inverse ETFs this week, taking only small profits. We will take the cowardly role and sit out the next few days in cash.