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More Fireworks to come after European bail-out euphoria subsides

For global stock markets October marked a continuation of the highly-volatile trading witnessed since the early-August sell-off. The FTSE 100 finally broke out of the relatively narrow trading range (see chart below) I highlighted last month, first with a sharp drop at the beginning of October – which was then followed by a 20% rally in the space of four weeks. This took the blue chip index up through its 200-day moving average – a very bullish signal for those of us with an interest in technical analysis but it would be fair to say this was a case of the market recovering from a previously oversold position.

Rallies of Hope, Troughs of Despair

Since global stock markets slumped in early August investors have endured a period of extreme volatility. As you can see from the chart below the FTSE 100 has settled into a trading range with sharp moves higher coming courtesy of hopes of some sort of resolution to the sovereign debt crisis, whilst vicious sell-offs have been caused by realisations that no actual progress on such issues has been forthcoming.

Enough of the Funny Money Already

I was somewhat pleased to have taken my holiday in mid-August. Not only was I out of the country at the time the riots were all kicking off but I also missed a bout of extreme volatility in global stock  markets. Upon my return situations had calmed down somewhat and markets were eagerly awaiting last Friday’s (26/8) meeting of central bankers at Jackson Hole, Wyoming. At the symposium the Fed Chairman, Ben Bernanke, was expected to at least hint that there could be a third round of quantitative easing in the pipeline – a so-called QE3. Alas, it was not to be.

SOVEREIGN DEBT ISSUES CONTINUE TO WEIGH ON SENTIMENT - WHILST ECONOMIC GROWTH PROVES ELUSIVE

If I never hear the word debt again I’ll be a happy man. The Greek situation has been resolved again as the can is once again kicked down the road. This €150bn ‘extend & pretend’ solution at least has some merit to it in that the private sector will share some of the load. The markets certainly breathed a sigh of relief on the news but this was short lived for elsewhere in the eurozone the debt crisis is still escalating. In addition, we went from one crisis to another.