Wed, 9/28/11 4:39 PM – Market Finishes at Lows, Looking for Strong Leadership in Europe

The selling in stocks accelerated during the last hour and the S&P 500 finished about 2% lower. It has given back half the intraday advance since last Thursday and sits 2% above the closing low from a week ago, the low for the month. It is 4% above the intraday low for the year, set August 8.

Europe is the key. The stock market over the next week should trade based on the consensus perception of odds on a solid Eurozone agreement.

An agreement in Europe will almost certainly happen in the next week or so. Whether it will lay to rest fears over European contagion is doubtful. When 17 different parliaments have to agree on any bailout plan and Grecian leaders are learning responsibility only slowly while their people keep protesting, sometimes violently, things don’t look great long term.

As I have written numerous times, this ends with a United States of Europe or a shrunken Eurozone.

Everyone is looking for strong leadership. Strong leadership and centralized authority go together. If a very strong leader arises it will be because things totally broke down. A strong central authority can arise without a strong leader but will still require ongoing troubles in Europe to occur. Neither scenario is good for stocks short-term. That may be why markets around the world are so keyed into how things go in Europe the next few weeks.