European Closing Thoughts: How long is the road?

The rally in retailers spurred by better than forecast earnings by Home Depot Inc sent US benchmarks into the green overshadowing concern about Greece's debt plan and the budget debate in Washington.

Half an hour before the European cash close the DJIA rose 0.24% to 12,846.10, the S&P500 traded 0.17% to 1,382.40 while the tech Nasdaq fell 0.33% to 2,894.80, pressured by weakness in Microsoft.

On the US opening bell sectors tied to the pace of economic growth such as energy and banking, were among the weakest  as US lawmakers have more or less seven-week deadline to reach an agreement on the so called fiscal cliff. Although some kind of deal is expected to be reached, the question is will it be enough or will it just buying time as it's happening in Europe?

European market followed the US lighthouse, the Stoxx50 traded 0.39% to 2,483.24 while the German Dax fell 0.09% to 7,162.56. Southern Europe markets were the locomotive with the Italian Ftsemib up 1.27% to 15,313.80 and Spanish Ibex up 1.68% to 7,694.90.

The common currency traded off from daily lows into the green rising 0.02% to 1.2714$, while the greenback fell versus the Japanese Yen 0.08% to 79.43Y.

The move in the greenback supported the recover in the oil market where WTI fell 0.07% to 85.51$ a barrel, while Gold made the green rising 0.02% to 1.2714$ an ounce.

The question now is are the bulls back in control?

The answer is: they never lost the control, as we said in our game plans the Line of Least Resistance (LLR) is still upward sloping and therefore we are still in “bulls” territory if you want to use this word. Although we got a short bias we were well aware we were trading against the LLR and therefore once the Eur/$ recovered the 1.2700$ mark we refrained to open new shorts. From a fundamental point of view more time has been bought for Greece, the question is if it will be enough to solve the problem.

According to us European politicians are just pushing the can down the road, the question is how long is the road?

As someone said: Buying time is a costly business.

Have a great evening

Originally posted at www.77sigmatrading.com