I don't believe the Schaeuble comments yesterday were an accident. The markets have moved very far, very fast following statements on Oct 4th that Europe would commit to recapitalizations of financial institutions. Because markets around the globe have seen significant gains since then and because European leaders know that they have no plan of substance to back-up the comments to provide liquidity, it was probably smart of the German Finance Minister to issue a warning that it is unrealistic to expect a definitive solution to the euro zone debt crisis at an EU summit this weekend. Better to dampen sentiment a little bit now rather than wait till after the summit. We'll likely have to wait till the first week of November to hear a more detailed plan.
The S&P 500 is still up more than 10% off the closing price on October 3d and overall, expectations remain that the EFSF will indeed provide the liquidity needed to prevent contagion from Greek Bond defaults. For this reason I continue to be bullish overall and look at higher highs ahead. That being said, we still have the chance to move lower before we move higher.
As I mentioned in my comments from yesterday, I was watching the lower 1190 support on the E-mini S&P 500 futures (ES). So far we are maintaining that support as the ES has now rallied 10 points off this morning's lows. Waiting for confirmation before entering any swing long positions. I will be watching for a pull-back to 1188-1190 before considering a long entry. Any longs will be scalps or intra-day trades until support is confirmed. A daily close below 1190 would set my next price target at 1174 ES. I like longs if the ES trades that low.
In other negative news, Moody's warned it may issue a negative outlook on France's AAA credit rating in the next three months if the costs for helping to bail out banks and other euro zone members stretch its budget too much. That news could weigh down markets further.
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