Weekend Ramblings

Sad day for me as my beloved Azzuri took a beating by Spain and lost the Euro finals 4-0. It was a great run and nobody expected them to get this far but too bad they couldn't put in a better performance.  Italy played Spain in their first game of the tournament tying them 1-1 and played good enough to win that game. So, how do you figure they get blown away 4-0 the second time around? It looked mainly like fatigue to me, exacerbated by some poor player selection decisions by the coach. Italy had only 2 days rest vs 3 for the Spanish and as a soccer player I can tell you that this one extra day can make a huge difference. Now, don't get me wrong here...Spain is the superior team but if you're going to stand a chance at beating a superior opponent just one time, you need to be playing at your best and the Italians were not and I speculate a large part of that was due to lack of recovery time after their emotional win over Germany. I'll say this though...I don't think I'll even see another team like Spain dominate soccer the way they have been during the past 5 years. 3 major tournament wins in row has never been done before and they will probably have a decent shot at making it 4 in a row at the World cup in 2014.

Anyhow, lets talk markets. I stated that there was potential for fire works with the EU summit in one direction or the other and boy was there ever. Expectations were quite low heading into the summit which caught shorts flat footed. So, were the summit announcements significant enough to warrant that rally? I'm not smart enough to know with a reasonable amount of certainty whether what they proposed is the answer to the problems in Europe. It seems dubious that one meeting could solve everything doesn't it?  It certainty addresses one of the three criteria I outlined recently to make me confident the worst would be over which is bank recapitalizations. From the looks of it though, it seems more like a stop gap measure as opposed to a LT solution but it could at least buy some time or be part of a larger number of steps to finally once and for all put their European fiasco to bed. But again, I'm not even close to being an expert in these kind of things.  What I do know though is that all the EU summit provided was talk and no action, but this talk certainly was significant enough to make the shorts scramble because this summit seemed so hopeless. 

I have my doubts that Friday's rally was the all clear signal that the correction has ran its course even if it goes higher from here. Prior to this ramp, I talked about how the indicators I tracked were a mixed bag with some key holdouts not giving the green light. Heading into Friday though, sentiment improved more in favor of the bulls as AAII showed almost a 2:1 ratio of bears vs bulls which in the past if often followed by at least a ST rally. Also there was a large outflow last week which was about the same size as the inflow at preceded the ST peak the market made about 10 days ago. Of course, you would not have been able to capitalize on this sentiment data much because the market gaped up huge on Friday. On a more larger scale though, I still think that weren't not out of the woods just yet. If this rally is "real" and is the start of another 30% advance like we saw coming out of the correction bottoms of 2010 and 2011, the market should show a change in character and not give you "convenient" entry points if you want to jump back in....i.e. a grinding but relentless uptrend with no sizable dips. 

I suspect this market will still be treacherous for both bulls and bears alike for a while longer. As usual though, I'll take my cue from Mr. Market.