After Monday’s pullback, the markets rebounded strongly more than wiping out the previous losses. The catalyst came in form of yet to be confirmed news that the European Central Bank has a plan to deal with Greece’s debt.
Germany is allegedly working on a rescue package with possible loan guarantees, but these rumors were later rebuffed as unfounded. Nevertheless, that was all the markets needed to hear and off to the races we went with all major indexes closing solidly higher.
While Greece maybe have been the catalyst of the recent sell off, I believe that a correction was way overdue anyway, and it now remains to be seen whether yesterday was just a one day technical bounce that can’t be sustained.
As our Trend Tracking Indexes (TTIs) move closer to bearish territory, I will more frequently report on market activity and also mention the proximity of the TTIs in respect to their long term trend lines.
With the market rebounding, we saw improvement in the TTIs as well, which are now positioned above their long-term trend lines as follows:
Domestic TTI: +2.76%
International TTI: +1.45%
While the potential for a Greece bailout had a positive effect on world markets, the story is far from being over. There are some 4-5 countries within the 16-member Eurozone with similar problems that need to be addressed sooner or later.
Whatever the “Greek solution” will be, I am sure other debtor countries will make an appearance, tin cup in hand, hoping for a similar solution. None of this is bound to be a positive for markets in general.