Wednesday, November 3, 2011 9:15 am EDT
DJIA: 11,657.98 S&P 500: 1218.28
Back into the cesspool of uncertainty.
A major step was taken last week as European leaders struck a deal regarding bank and sovereign debt issues and Greece.
However, the details are the devil in this case, as Greek Prime Minister George Papandreou surprised everyone Monday and called for a referendum vote by its parliament on the bailout plan outlined last week. The vote begins today and will probably be concluded this week.
Papandreou will meet in Cannes, France today with German Chancellor Angela Merkel, French President Nicolas Sarkozy, European Central Bank President Mario Draghi and others to discuss his action.
Papandreou told Bloomberg News this is a yes or no vote on the loan accord, on Europe in general and on the euro, that the referendum will be a “clear mandate and strong message within and outside Greece on our European course and our participation in the euro.”
The risk here is a Greek default and whatever domino affect it has on Italy and other countries and global banks. While probably unavoidable, Greece’s referendum vote disrupts progress on addressing key issues in Europe – everything is now on hold, even in jeopardy.
Was the agreement struck Europe last week DOA? Clearly if the European leaders don’t know, I certainly don’t. Meetings start this morning, but anything conclusive is anyone’s guess.
The Federal Open Market Committee, or FOMC, meets today and Fed Chair Bernanke is expected to hold a news conference today shortly after 2:00 pm.
CONCLUSION: The only thing certain at this point is uncertainty. This situation changes by the hour and global markets really don’t know how to discount what is happening.
My Monday blog indicated a risk to DJIA 11,750 (S&P 500: 1235), but that was based on the need for a “technical” correction and disappointing economic news if it surfaced from the many reports scheduled this week, NOT from an unexpected action by Greece. Tuesday, I was away and out of touch.
Downside here can be greater due to Greece’s action, and especially in the event of default, because that puts Italy in question, and then who else ?
Does it get uglier ? Without last week’s agreement among European leaders, I think we would be in a free fall.
This could be a great buying opportunity. All that has to happen is for the Euro-situation and Greece to stabilize. But that has been our problem all along, so it is a question of risk tolerance. It’s a buy if you can afford to be blindsided by yet another ugly surprise.
Recent blog headlines:
Oct. 14, DJIA: 11,478, “Europe Still the Key – Q3 Earnings Run a Close Second”
Oct. 17, DJIA: 11,644, “Snags En Route to Euro-Solution to be Expected”
Oct. 18, DJIA: 11,392, “Test of the October 4 Rally’s Strength”
Oct. 19, DJIA: 11,577, “Best Six Months Looms, But Volatility to Continue”
Oct. 20, DJIA: 11,504, “All Eyes on Euro-Summit this Weekend”
Oct. 21, DJIA 11,541, “DJIA 12,000 “IF” the Europeans Can Get It Right”
Oct. 24, DJIA 11,808, “Euro-Solution Announcement After Wednesday’s Meeting”
Oct. 25, DJIA 11,913, “Short-Term Euro-Solution Doesn’t Cut It”
Oct. 26, DJIA 11,706, “Ball’s in Europe’s Court”
Oct. 31 DJIA 12,208, “Buyers on Dips. Euro-Deal to Hit Some Snags
-Doomsters and Shorts Out in Force”
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