Europe’s Mess Continues to Bear Down on the Market

By Paul Vigna

So much for that bounce.

Were still scratching our heads over that bounce in the wee hours of Monday morning, the one that saw the euro hold the line at $1.30, and stocks recover enough to push the S&P 500 and Nasdaq Composite every so slightly into the green yesterday.

For whatever reason, and it appears theres a number of them, the euro is managing to hold that $1.30 mark (under much duress; this mornings low is $1.2990.) Stock futures, too, were down sharply, winnowed away the losses and are dropping again.

Theres support in the market, whether its coming from the Fed, the Chinese, the banks, the Arabs, the Plunge Protection Team or the Illuminati. There are buyers at these levels.

How long they remain, and how much they buy, is the question now. Europe is very unsettled. Greece is having trouble forming a government, the uneasy Hollande-Merkel courtship has already begun, Spain is talking about bailing out its banks. Underlying it all is talk of bailouts, exits, and alliances splintering apart.

The bears are going to push this issue.Indeed,theyve been pushing with ever greater force for a month now. This is the way the market works. Downward pressure is exerted, support levels are hit, they hold, pressures applied again, supports hit. Themaneuveris repeated until somebody wins.

Dennis Gartman had this to say this morning in his daily The Gartman Letter:

As we have said countless times in the past regarding any and all of the markets we cover in TGL, confusion breed contempt. Markets can accept almost any sort of reality, malign or benign as it may. They can even rally if the previous malign status is either finalized and/or is moderated; but they abhor confusion and at the moment things in Greece are more confused than they were even in the run-up to the election.

Gartman made the point that moneys flowing out of the euro and into the Canada dollar, a safer haven. We add to keep an eye on the U.S. 10-year Treasury, which was yielding 1.85% this morning.

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Europe’s Mess Continues to Bear Down on the Market