Ready for a Bounce

 | Nov 02, 2011 | 8:55 AM EDT
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"The world is not going to be saved by legislation." --William Howard Taft

After being roiled by surprise news of a popular vote in Greece on the bailout, the market has calmed down as various meetings and discussions are scheduled for today. It is almost too stupid to believe that Greece would kill the deal, which was celebrated as a glorious solution just a few days ago.

Given the recent market history, we have to be watching very carefully right now for the right headline to hit and another Europe-i-saved rally to occur. We have had dozens of these rallies and they have been almost automatic following a bout of indecision in Europe over the course of a few days.

Conditions are ripe for a big bounce on the cancellation of the vote in Greece, so we'll be chained to headlines once again.

Surprisingly, the Fed's FOMC interest rate decision takes a backseat to the Greek drama today. The latest decision is due at 12:30 pm EDT. No one expects any modification in rates, but the policy decision will be parsed very carefully for any hint of further quantitative easing.

We haven't heard much talk about QE lately, but it's still out there and has the capacity to move the market should market players start anticipating that the Fed will fire up its printing press again. Many feel that it really won't be effective in helping the economy, but the market likes it because any new money will likely to flow into equities. There isn't any other place for it to go, and the market will celebrate even if does nothing for the economy.

After two sharp days of selling, we are set up very well for a bounce. We are sitting at support levels around the top of the recent trading range and just need a little positive news flow to spark a rebound.

The dip buyers want to buy this market and they don't need much of an excuse. The Greece news spooked potential buyers the last couple of days and kept them on the sidelines, but any signs of stabilization in Europe or a hint of QE from the Fed will bring them into the market quickly.

I'm looking for upside in the near term and for entries. I still hope we have a market that is more focused on stock picking than headlines, but there are few signs of that yet.

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