A big rally on Wall Street today as the bond market was closed for Columbus Day. In other words the adults stayed home. So stocks had their way on hopes that Merkel and Sarkozy would come up with a feasible plan to take the French and German bank debts on to the public balance sheets, or at least whichever part is not served up as a haircut to bondholders and bank shareholders.
The US is keenly interested in this because despite assurance otherwise the contagion and counterparty risk with Wall Street is significant.
Volumes were very low so the rally was not as impressive as one might imagine. But the shorts were there and they were squeezably soft and overexposed.
This will likely continue to be an event driven market and when the events subside, then the gimmicks and technicals of the traders take over.
