They have blamed deb crisis of Euro zone too much to explain while the world financial markets have been going down. Then, they explain the market going up by European Promise to Help Banks. I don't think the explains are right. I don't think Greece (a small country) defaul making the world economies collapse, either!
The news or a intervention could make the markets going imbalance. Then, the market will return their balance later on.
The value of a currency of a country depends on its economic status. It doesn't change right way by a intervention of its banks. But, it travels its change in its country and to the orther countries. This needs a certain time interval.
Sometime, it affects good to economy, but sometime, it doesn't affect at all.
Economies of a government should know where imbalance of economy and financial
markets are to plan a certain polycies to fix its economic status.
I could give some reasons to explain the markets lately.
First, QE2 is a form of intervention of the U.S. government. its purpose makes low interest for loans to stimulate the economy. It put the U.S. stocks going up 23%. The markets went away their balance. The QE2 finished on the end of June-2011. Now, the market is a free market. It is coming back its balance within a certain time interval. Please, Look at S&P 500's monthly chart, you could see S&P 500 hit R3. Here, some traders got profit and buy. Then, S&P 500 have been bounding back. Base on Imbalance points of the S&P 500, I have projected a future price of S&P 500 in a free market. If we have QE3 - another intervention - making the markets change, the chart could change by artificial markets.
Currency CHF (France) was high compare to the other currencies recently. It's not good for their export. then, The Swiss banks made some intervention to devalue its currecy on last month. This leads to a imbalance in the market. Now, You could see CHF/x have bounding back to a its balance point. Then, It could affect the market later on.
EUR/USD have been bounding back after some bad news. The chart of EUR/USD and
its future chart are similar.
Dowgrade of Euro zone's many banks from some rate agents aren't exactly lately. They have been making traders confusing for their trading. Maybe, they did services to help some funds. the funds' manegers don't undestand where the markets rebound. Suddenly, EUR/USD have been going up. Now, 1.36. They could be lost money by their short positions because they have wondered where the money helps Euro zone. They never think the market going its balance. Its Internal strenght! I think the Euro economy still is better than the U.S. economy.
The United States and the International Energy Agency have announced that they would sell a combined 60 million barrels of oil into international markets over the coming month. This lead gas price is going down to help the growth of global economic recovery. Crude oil prices have fallen more than 20 percent from their May peak.
Hence, S&P 500 could down more because of its positive correlation with USO (see the chart below). and EUR/USD, too.
Moreover, economic data as unmployment, spending by comsumers decreased in May. Hence, The growth of the U.S. economy is slow down lately.
S&P 500 has been down 64 points
The Fed acknowledges weakness in the U.S. economy and reiterate its commitment to keeping interest rates low for an extended period. Then, Investors will look for clues on new measures to support the economy as the Fed's second quantitative easing program ends this month.
[06/14/11, 15:30 (EST or NYT)]
The Stock markets refect economic status because of earnings of firms. Sometimes, emotions of traders and investors could drive the market more down or up by their greedy and fear. But, the markets will return their balance themselves by theory of the free market. This means the market average give us a estimation of economic status better than a short-term estimation.
If you look at 1-year chart of S&P 500, GE2 have pushing it going up in imbalance status of the market (Divergence). GE2 is a bond-buy plan of the U.S goverment. I think that the plan gives the larget financial instition more money. But, individual investors keep staying out of the stock markets. The same thing with EQ1, the goverment have given some banks money. The QE1 would have helped business and homeowner. After bail out, some banks have gotten some asssets and fixed their balance sheet, then returned money to the government by selling their stocks and using earning money to investment instead of helping business and homeowner. for example, JP-Morgan bank bought too much cooper and store them at warehouses in England last year. They understand that the goverment printing will lead to a inflation - increasing price of commodities. Now, They have made money from the investment. They save themselve!
Moreover, Some banks have been continuing down credit line of customers. The customers have been paying but balance of their account is always bigger than half of their credit line. This could make low their FICO's point, and this could leads to the wrong way for the credit market that affects to the bond markets. then, interate rates for loans.
If you look at a larger time frame of S&P 500, you could see in last 10 years, the U.S has two economic recessions. It could have another one in the near future if the U.S. won't have a right way of economy.
This is a picture jobless claims in a next few years which I have projected from Elliott wave Analysis.