For me, the market fundamentals and technicals appear to be aligning, and a shift away from headline risk. I still believe in the global GDP slowdown I highlighted in late November, and we are started to see it within earnings. Oracle being the most obvious. The expectation leads to slower eps growth, and because the growth is slow, the market multiple will be low. With the continued threat of a credit event, the market will trade with a multiple near 12. With a slower earnings growth, and no threat of a credit event, the market will trade with a multiple near 13.5-14.
So assuming the SP500 sees an eps of 100 for 2012, this gives a potential market range of 1200 to 1400. The action of the ECB pretty much eliminates a credit event right now, so the market should trade near 1300-1400 (100x13 to 100x14).
The technicals suggests this as well.
I will look to take on a market short when the VIX approaches the lower level. (I just think the market will need to consolidate from overbought conditions.)
Based on the above, and continued support from the ECB, the market should not see the craziness going forward. We should see a channeling market, but not one that moves so fiercely in a one day period.
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