Welcome Back, Volatility: Miracle Market Melt-up

Noting that the markets in the US were markedly higher this (turnaround) Tuesday, one would generally assume that some of the conditions that caused Monday's share collapse had been addressed and causing markets and investors to return to a more benign trading regimen.

Such an assumption would be, of course, dead wrong, because nothing really changed overnight. In fact, one could even go so far as to suggest that issues regarding the bailout of Spain's insolvent banks - which loan money to the insolvent Spanish government - had actually worsened, in Europe, at least.

First, there's the widespread assumption that the 100 billion euro bailout was already a done deal. It's not; not by any means. The German parliament still has to pass legislation to approve whatever funding is made available, and by which facility.

Second, the deal was supposed to have no strings attached, i.e., Spain would not have to agree to any austerity measures or fiscal controls. After all the deal was for the banks, not the government. Not so fast, my friends. Germany wants some guarantees of fiscal control and Finland has also made overtures about the need for substantial collateral.

And, if those two points are not enough, Spain will have to finance some of the bank debt itself, which is the epitome of the twisted pretzel that is the Eurozone. The Spanish government will borrow money to loan to the banks, which in turn fund the government. It's like borrowing money to loan to a friend who loans you money to pay off your debt, and we all know how those kinds of schemes turn out.

Additionally, in the utmost of ironies, Italy, the next nation in line for a likely bailout, will be borrowing money at 6% to loan to Spain at 3%. Lovely. Apparently, the Italians have been taking in a bit too much vino and forgot their 4th grade math.

So, what really changed to reverse the one-day trend lower and turn it up a few notches? Algos, naturally, the computer software that takes care of more than 85% off all trades on a daily basis, were re-programmed for a risk-on event, even though none actually took place. Around about 10:30 am EDT, with the major averages stumbling into the red, the correct knobs were turned and presto! all was well again at the Wall Street Zombie Casino.

From that time-stamp until the close, it was nothing but champagne and roses. Whoopie! Of course, the underlying theme of day-trading in both stocks and options by the hedgies and brokerages in advance of Friday's quadruple-witching event may have had a little to do with today's wicked upside.

Therein we have the week's trading strategy: Short Monday, long Tuesday, short Wednesday, long Thursday, and Friday, you're on your own, because over the weekend, Greece will once again go to the polls to see if they can elect a government in a country that neither has one nor - in the rare event that it will - heeds its dictates.

Greece could go belly up and back to the drachma, go pro-Euro and stick with the asset-stripping austerity, or alternately devolve into complete anarchy or continue to function on a day-to-day basis, essentially going sideways and solving nothing. Whatever happens in Greece, one thing is for certain: it's not going to be the final solution.

There was something of a "tell" to today's trading that belied the effectiveness of the rally. New lows beat new highs nearly 2-1.

Party on!

Dow 12,573.80, +162.57 (1.31%)
NASDAQ 2,843.07, +33.34 (1.19%)
S&P 500 1,324.18, +15.25 (1.17%)
NYSE Composite 7,557.82, +98.55 (1.32%)
NASDAQ Volume 1,589,679,500
NYSE Volume 3,400,954,250
Combined NYSE & NASDAQ Advance - Decline: 4156-1436
Combined NYSE & NASDAQ New highs - New lows: 64-113
WTI crude oil: 83.32, +0.62
Gold: 1,613.80, +17.00
Silver: 28.95, +0.33