Over the weekend, the G8 meeting of world leaders occurred at Camp David. (Europe has gone into a double dip recession, according to the Economist magazine.) The key news from that meeting was that several European countries pressed the case for growth stimulus in Europe - with austerity still a priority for after growth rates are improved. Angela Merkel, the German Chancellor, made some conciliatory noises on the topic, but said nothing binding.
Apparently that was enough to satisfy traders at the London Exchange. I believe that investors everywhere were waiting for a strong positive signal from anywhere. European markets closed higher, and American markets continued with a moderately strong performance - not outstanding, but nice. [My second long position is a penny below purchase price.] It is presently 12:30am EST and the Australian $XAO is up by 1%. Barring bad news from somewhere, Tuesday should also be a positive trading day in American markets.
Why did this market upswing happen? Merkel was definitely opposed to committing to anything, so the "good" news was conditional. Many political positions are being clarified in advance of further high level meetings on Wednesday. Spain reports that it is anticipating a further contraction in its economy for the second quarter. That news alone bodes ill.
I'm sure that a majority of investors were waiting for some bright spot to purchase devalued stocks. 17 of 18 DJ US Sector stocks gained, with DJ US Basic Resources ending down a mere -0.28. There were even gains in most of the stocks which I had chosen for the specific purpose of shorting if the slide continued. A generally positive day, but the $VIX dropped about 3%. Therefore, trading volume was much less than Friday. I would expect an net increase in the Fear Index if the day's trading was bullish. Many investors are biding their time.
Non-Binding Prognosis: Negative.
Too much residual uncertainty. At the moment, everything depends on the performance of European markets, but I think that enough doubt and negative news exists to restrain market performance. It is possible for American markets to overcome European doubt, so it could still be a net positive day.
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