Hope Springs Eternal In Europe

The market put in a dismal week last week, with no Thanksgiving bounce like we often see. Coming into today, the S&P 500 had been down 7 straight sessions, which puts the market in an oversold position.

Lo and behold, rumors of new progress in Europe have sparked interest in buying the recent dip and the markets are sharply higher in early trading. Asian markets were higher overnight and Europe is up strongly this morning.

In Europe, the IMF is working on loan support for Italy. And there is also talk about a new eurozone fiscal pact that would make budget discipline legally binding and enforceable by EU officials. This new amendment to the Lisbon Treaty has been pushed by Germany's finance minister who thinks this initiative would be the best way to calm market fears.

There have also been lots of talk about the strong holiday retails sales that started with Black Friday last weekend. The retail etf (XRT) is up nearly 4.25% so far today, leading the early action.

The energy and materials sectors are also up strongly with commodity prices bouncing. Oil prices are back above $99 and gold prices are up near $1717. Silver and copper prices are up nicely as well. The bounce in the euro is helping the CRB gain 1.5% so far.

The 10-year yield is trying to stay back above the 2.00% level (currently 2.04%); and the VIX is down -7.6% so far to 31.85.

Trading comment: There seems to be a lot of enthusiasm this morning to take advantage of the recent market dip. But there is still a lot of overhead resistance, and given the way the market has traded recently most investors are probably defensively positioned. If the news in Europe is for real, and can gain additional traction, that would be very good for the market. But if things flare up again across the pond, this could easily turn out to be another one-day wonder and disappointment. So I don't want to get too aggressive just yet.