Yesterday stocks yo-yoed as European news items poured in from every capital
with buyers responding to one and then sellers to another. At one point the Dow
lost 100 points following a news item suggesting that Austria's parliament had
voted down a bailout fund for Europe. It turned out that the parliament had
merely postponed a meeting to discuss the bailout. Back and forth it went until
Chancellor Merkel of Germany rejected any notion of forcing Greece from the euro
zone, and the market responded with a rally that topped at 281 points above
Tuesday's close. The session ended with a rush of profit-taking that gave back
half of the gains. This sort of irrational trading is characteristic of a market
that is in the hands of traders as most long-term investors are standing aside.
It is also indicative of a market that could top off at any moment at a
technical barrier that traders or machines have identified as too difficult to
overcome. Barriers of significant technical resistance are the 50-day moving
average of the Dow industrials at 11,582 and the 50-day of the S&P 500 at 1,234.
But as noted yesterday, bear market corrections often run the indices up through
necklines and even 200-day moving averages before sellers finally take charge.
But, admittedly, with markets as sensitive as this, the most minor barrier may
be the one that turns the entire market south.
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