1 Week Later...

Looking at the way this market is right now, you would have thought last week didn't mean anything. After crashing down Equities have crashed back up, with the ES posting 3 back to back 1% plus gains which is the first time since 2011 this has happened, and the VIX index has dropped over 10% in each of the past 3 days which has never happened in the history of the VIX.
So the buy the dippers are out in force, and it is safe to say this was the pullback everyone was waiting for and soon as support was found it has raced up super fast.
The FED and other Central Banks are still throwing around QE rhetoric, and with China growth sluggish, the PBOC are looking at further rate cuts, so as the economies around the world remain sluggish, this is the best conditions for the US markets as they continue their rapid accent to new highs. European Indexes are still way off their highs and are reliant on more from the ECB to push it higher.

When the day comes that central banks do have to unwind, it will be a real test to the market!
Bonds have come of their highs as the correlation with Equities seems to be the best its been in a while, Spreads have come back in Short Sterling and Eurodollar also and is now sitting mid range, which is making it a bit tougher to pick direction.
We have BoE minutes later today, as well as US CPI, so looking for that to bring some volatility to the mix.
Main event for the week is the UK GDP figures on friday, so hoping to get flat before that.

Bunds near highs

As the European problems persist, Bunds are making a run for 140! We reached a high of 139.75 after the Italian auction which was an all time high for the Bund, as investors are in essence paying the German government to keep there money.
Stocks look to be heading for a slightly lower open as an inline earning from JP Morgan who historically tend to beat expectations will put pressure for the rest of the day.
More analysis on Monday.

Bunds rally on Italian debt worries

So how about a 400 tick rally in the bunds so far this week! We were looking at top side resistance at 136 area and we have smashed through and back above near the all time highs of this contract trading in the 138s. Not for the faint hearted these moves.
I think 138s-139s will be a very big sticking point as yields will be super low, but if the situation escalates we could see 140s soon.
Italian yields are rising causing alot of concern and pummelling bank stocks. Coupled with the Greek prime minister saying it will have a referendum on the bailout, which is ridiculous. Its laughable really.
Euro traded low 1.36s after being at 1.42s last week. How quickly things change!

Eurozone Bailout

In essence the Banks agreed this morning to take half of what they are owed by Greece as part of a deal brokered by European leaders to solve the continent's debt crisis and prevent it from igniting a new global financial meltdown.

The reaction is what you would expect from news like this, we see Bunds falling 150 pips, euro up above 1.40 spreads widen, and Stocks going through the roof.
It looks like we are going to reclaim 12000 again in the DOW, which marks a pretty significant turnaround for the month given we started the month with the DOW trading mid 10000s!

Going forward there no reason for the Stocks to not keep rallying, but quite frankly its hard to think that this is it, Problem solved, although short term I think it seems that way. Listening to bank strategists some are predicting another 10-20% up from here, and looking at the momentum in these markets I can't say I can disagree with them. But as always got to keep tabs of new news coming out.

We are awaiting US GDP so this will set the tone for the rest of the session.