The price action of the market makes news. This was evident today. The economic data was bad and normally when the Empire manufacturing index is negative for three consecutive months it signifies recession.
But bad news is good news for the super computers that control the markets. Markets are up three days in a row on decreasing volume. That is quite understandable. After the panic, retail investors do not have the stomach yet to go long. If anything they are selling into the rally. That is the whole idea of the panic. Buy cheap and then sell high. Very soon, 200 DMA will be overcome and once again greed will overtake fear. Wash, rinse and repeat.
If 2008 was memorable for bank failures and credit crisis, 2011 / 2012 will be remembered for sovereign debt crisis and of course bank failures. This time the bank failure will come from Europe. French banks are particularly vulnerable. It seems banks like Society Generale has a leverage of 50:1. How long before it blows up? The trouble was evident last week but France banned short sale of bank shares for 15 days. So the problem has been hushed up for now.
So the market rally today because TPTB (The Power That Be) wanted it to go up. Today was a major accumulation day. So we can expect a red day tomorrow or a very small green. But the rebound is not over yet. I expect the SPX to rebound between 1250 -1300. 61.8 % of Fibo. Retracement is 1270 and 200 DMA is 1280.
If you believe Elliot wave mumbo jumbo, then we are in wave 4 up and it should be followed by wave 5 , testing the lows. Most likely reason, Banksters will create panic for QE3.
I think we shall see more disturbances by the end of the month or even before and markets will retest lows.