Optimism Running High In Europe Ahead of Big Weekend

The market rallied right at the open after European markets showed signs of optimism that this weekend's European Summit would provide some answers to the debt crisis in the region. There hasn't really been any new comments. In fact, there was a headline that the "situation in Greece has taken a turn for the worse". One has to wonder if expectations have gotten ahead of themselves.

The enthusiasm sure didn't show up in Shanghai overnight. China's market was down for a 5th straight session, and fell to a fresh 2.5-year low. Don't they know the troika is about to solve all our problems?

Earnings reports have been mostly positive also last night and this morning. On the positive side are CMG, MCD (new all-time high), SNDK, and COF. On the negative side is APKT. And on the side of just okay, but not big reactions are SLB, VZ, MSFT, and GE.

The dollar is lower today and commodities are bouncing back. Copper is surging +5%, oil prices are above $88, and gold is higher near $1636.

The 10-year yield is back to the 2.20% level; and the VIX is down -7% this morning, but still at very elevated levels at 32.31.

Trading comment: Some of today's positive open may have been exacerbated by options expiration today. But technically, the S&P 500 has broken above its 8/31 highs at 1230. So for now we have broken out of the trading range to the upside. This is a good sign, but with the market up for nearly 4 weeks straight I think we could get a little pullback next week. Of course, a LOT depends on the news out of Europe. There is a summit over the weekend, and I believe a second summit around Wednesday. We could be setting up for a 'buy the rumor, sell the news' type of reaction also. Overall, if you're looking at adding to longs I think you can wait for a pullback.

long MCD, SH