Are the markets at the mercy of European policy makers or are European policy makers at the mercy of the markets? The answer to that question is going to determine whether or not we get our “santa clause rally.” If the markets are indeed at the mercy of EU policy makers than we could be in for some bumpy roads ahead. However, if EU policy makers are at the mercy of the markets then we should get some smooth sailing into the year end.
Last Wednesday when the market rallied 500 points (seems like eons ago, doesn’t it?) the S&P500 was on the verge of breaking critical support around 1,155. Is it a coincidence that the central bankers around the world decided to take such drastic action right around that time? Maybe so, but we find it hard to believe that they didn’t feel at least somewhat pressured by what appeared to be a market heading to new lows.
Fast forward one week, and 7% higher later and Germany is signaling that they don’t feel the same sense of urgency that they may have felt one week ago. Or maybe it’s just that Germany is doing what Germany always seems to do, look out for themselves. Germany is certainly allowed that right, but maybe a 11% rally in the German Dax composite over the lats week helped them remember such a right?
So now that the Dax shed 2% Thursday and looks poised to drop further if policy makers don’t get on the same page soon it might be in their best interest to reconsider their strategy. We will learn soon enough if EU policy makers, especially those in German are at the mercy of the markets, or if the markets at the mercy of them. If it proves to be the ladder… look out below.
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