Cliff Wachtel's  Instablog

Part 1: Prior Week Market Movers & Their Lessons For the Coming Week

The following is a weekly strategy guide for traders and investors, covering prior week’s market movers and their lessons for the coming week for traders of all major asset classes via both traditional instruments and binary options. Perfect for those seeking a summary of prior week market movers & their lessons for the coming week and beyond, & a look at likely coming week market movers.

Markets moved with rumors on the coming solution for the EU debt crisis, which is expected no later than at the end of the October 26th summit Wednesday. That’s it. Everything else was and will be mostly irrelevant, because the EU remains THE existential threat to markets and the global economy. With weekly credit downgrades and rising CDS spreads, the EU is literally in a race against the clock, seeking to calm markets and buttress its banks before being swept under a wave of defaults that could suck down the rest of the world with it.

Here are the key points from the prior week.

• Monday:  German Finance Minister Wolfgang Schaeuble said there wouldn’t be a comprehensive solution to the EZ debt crisis coming out of the October 23 weekend ECOFIN summit.  This doused hopes raised by Merkel and Sarkozy on October 9th, when they promised a comprehensive solution crisis by the end of the month.

• Tuesday: Markets closed the trading day in New York higher on a report hinting that France and Germany were concluding an agreement on a €2T rescue fund, though they fell back from highs on doubts about this.

• Wednesday: Risk assets closed the day lower on a Reuters report that French President Sarkozy said the EZ debt talks had stalled on disagreements. The Fed’s gloomy assessment of the US economy didn’t help.

• Thursday: While Asia and Europe were lower, a late report after they’d closed but while the US was still open said that a bailout plan would be approved in a newly scheduled meeting Wednesday October 26th. If nothing else, this did confirm reports that the weekend October 23rd meeting would not yield the anticipated solution.

• Friday: Markets again rallied, fueled mostly by news from a German official that German official came out and said the concerns over disagreements were exaggerated, and confirmation from EU Council President that a second summit would occur on October 26th, which is when the big solution is expected. Thus Wednesday remains the focus for the coming week. If markets like what they hear, the nascent risk rally is on, with special benefits to the EURUSD. If not, expect the opposite.

See Part 2 for details about the rescue package and what it must accomplish to succeed.

While nothing else besides rumors about the EU rescue plan really moved markets, there were other noteworthy events last week.

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DISCLOSURE /DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY, RESPONSIBILITY FOR ALL TRADING DECISIONS LIES SOLELY WITH THE READER. IF WE REALLY KNEW WHAT WOULD HAPPEN, WE WOULDN’T BE TELLING YOU FOR FREE, NOW WOULD WE?