Good Morning, Friends. With the extension of new swap lines from a number of central banks (including the Fed) to the European Central Bank, concerns over the ability of European banks to cover their borrowing needs in Dollars through year end have abated. That’s a positive for equities; another is the rumor of a TARP-style plan to help European banks recapitalize ahead of what could then conceivably be an orderly restructuring of Greek debt.
Since concerns about Europe have been responsible for a good deal of the recent softness in stocks, the hope that there might be a resolution that stops somewhere short of Armageddon is keeping a bid under the SPX, and the Euro. The latter shows an inside vertical bar for the previous hour; Todd spends a fair amount of time on these in his courses and in his evening commentaries, so it will be interesting to see how it resolves.
If the concern over things European begins to recede, the recent tendency for stocks to be closely (negatively) correlated with the Dollar may begin to break down as well, as traders begin to focus on the U.S. economy and corporate earnings; for the moment, good news for the Euro also appears to be good news for stocks.