The market rallied the last two weeks on comments from German Chancellor Merkel and French PM Sarkozy that they had agreed to come up with a comprehensive plan to solve the Euro crisis, including dealing with Greece and ensuring that Eurozone banks were sufficiently capitalized. A meeting was called for this coming weekend and it was announced that a deal would be made public next Monday, the 24th.
Today, German Finance Minister Schaeuble said that there was no way to get a definitive deal done by then. The money involved is in the hundreds of billions and Germany is pushing for a 50% markdown on Greek bonds, more than twice what was agreed upon in July. France is resisting this as its banks would suffer. Also, France wants much longer for banks to recapitalize.
Separately, forecasts have been raised for the ratio of Greek debt to its economy, measured by GDP to rise to 200% by the end of 2012. It is 167% now. Much of Greece is on strike today, protesting austerity measures while over the weekend Roman protests in sympathy with the Occupy Wall St. sit-in produced a lot of violence.
Technically, since the stock market trading range started in early August, each time the market has gone above 1200 and then had a down day the market has fallen on succeeding days, usually down to the bottom of the trading range. We’ll see what holds this time. I expect the market will hold up better this time. Buying can be expected to come in at 1200 and 1170 on the S&P 500 index, currently at 1200.