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ETF Periscope: Benny And The Greeks

 September 26, 2011 11:38 AM


"Why don't they make the whole plane out of that black box stuff."  –Steven Wright

Ben Bernanke struck out swinging.

Next up: the European Union's heavy hitters. How they handle the curve ball will go a long way toward establishing the market's direction for the upcoming week and, most likely, for the remainder of the year.

On Wednesday, the Federal Reserve Chairman announced that the Fed was effectively lowering long-term consumer borrowing costs. The vehicle for that action was dubbed "Operation Twist," a $400 billion swap of longer-term Treasuries for similar short-term holdings.

Wall Street, which apparently wanted to see a more dynamic level of economic stimulus, was so disappointed that it staged an epic sell-off of equities, one that dropped the Dow Jones Industrial Average (DJIA) by a stunning 600 points over a two-session period and about 700 points on the week.

[Related -Sector Detector: Stocks Cruise Right Along, Whistling Past The Graveyard]

The only really good news for the market was that on Friday, the Dow was up 37 points.

On the face of it, that hardly compensated for the 6.4% weekly decline, its worst since October of '08. However, the fact that the market found support for the second day in a row at the same level may prove to be significant. It likely meant that acceptable price points for stocks were finally identified by institutional investors, and it kept the market from plunging below the lows of the year.

Coupled with the fact that Wall Street was heading into a weekend already laced with uncertainty due to upcoming EU debt crisis deliberations, a Friday failure into the close could have really sent investors scurrying for the exits "en masse."

[Related -How This Bull Market Resembles The Nasdaq Rally After The Dot-com Crash]

Obviously, the Blue Chip index wasn't the only victim of the week. In addition to the Dow being down over 6%, the S&P 500 Index (SPX) was slammed lower by 6.6%, and the Nasdaq (COMP) fell 5.3%.

Also noteworthy, recent commodity darlings gold and silver got seriously hammered on Friday, with gold losing over 5% and silver diving down around15%.

Now that Bernanke has cleared his throat and moved off center stage, the players comprising the EU crisis are again returning to the spotlight.

In spite of systemic monetary problems within a number of EU member nations, primarily the PIIGS (Portugal, Ireland, Italy, Greece and Spain), it appears that investors are capable of being placated by promises of solutions in lieu of the real thing. This was evidenced less than two weeks back when France's Nicolas Sarkozy and Germany's Angela Merkel announced, in tandem, their solidarity in maintaining the EU and the single currency.

However, voices of a less optimistic tenor emerged last week, contributing to the market's dive.


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