Markets rallied sharply on little hard news Monday beyond rumors. The rally boiled down to one thing: markets were oversold. (I pointed this out in the $NYMO (McClellan Oscillator) on Wednesday and again Friday.)
Sure, headlines had it another euro zone fix was rumored to be close but there wasn't any hard news to support this. In fact, most of the news there was negative with Germany's Finance Minister Schaeuble stated that the country would not accept any euro bonds in any form whatsoever. Later it was reported France and Germany were prepared to take drastic action while the IMF was rumored to be drafting an $800 billion bailout plan for Spain and Italy. And, if the IMF is "in" then so is the U.S. with another large bailout given its large IMF commitment, and so it goes.
A classic chart well-demonstrates that Europe is quickly heading to recession as noted below:
Britain is worried eurozone issues will drag Britain into recession and bailouts as well.
It was expected that short interest in U.S. markets would be high; thereby reinforcing a massive short squeeze but it turns out via the NYSE that short interest was falling.