It started out as another choppy week for the stock market as last Tuesday's sharply higher close caught me and many others by surprise. As I noted the next day, the market internals did not measure up to the price gains so this made the following days and the weekly close the most important.
Of course, the Tuesday turnaround was spurred by the "European Central Bank's plans for ?1 trillion of monetary stimulus" as the Euro markets rallied in impressive fashion. The Dax Index hit a low last Monday of 9161 and was up 4% by early Wednesday.
However, the surprisingly weak economic data out of the EuroZone and China quickly dampened the market's enthusiasm. This put the markets back on edge, as Wednesday, US stocks closed lower.
On Thursday, the market responded positively to better US data suggesting that Tuesday's upside breakout could be maintained. This supported the more bullish outlook case I outlined last week, though it was not my favored scenario.
The markets got another surprise Friday when the ECB's Draghi commented that the bank must "raise inflation and inflation expectations as fast as possible." These strong comments reflected the urgency of the situation as the Euro markets and the US futures were sharply higher in early trading.
The Chinese then added fuel to the fire as the People's Bank of China cut rates for the first time in over two years. Some economists are skeptical whether this will work, but it extended the Euro markets already impressive gains with the Dax closing up over 5% for the week.
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