EFA iShares MSCI EAFE

What is the market telling us after another fun weekend of Euro-crisis headlines? That it still wants to go higher. I am not going as far to say that the "path of least resistance" is higher. It will still be a battle.

But since we finally jumped to confronting the biggest of sovereign debt worries via Italy, it means something significant that the market isn't running away scared of systemic banking contagion.

The Greek drama has really just been the strongest (weakest?) test case for the Eurozone experiment that the whole world is forced to watch. Because as I said last week, "if Greece is the tip, Italy is the iceberg."

I think that "something significant" supporting the market is that Europe will repair its leaky dams enough not to hamper the US economy. This is what I predicted in August and reiterated in September, and I'm sticking by it. And the chart, as a picture of institutional market psychology, seems to support this view.

What would surprise most market participants right now, especially with the VIX slipping down to a nice quiet 31 level in the past 3 sessions, is a quick trip down to 1,200.

And I think that would be very healthy for this market too. Flush out the weak hands, so that we can buy with both of ours.

Sure, a real Euro-scare would take us to 1,160-75. And that's when you add. Whether you just trade the short term swings or also invest for the long-term, I don't think we'll get many more chances to buy the market in the 1,100 handle again.

It's a little debilitating and emotionally exhausting to feel that our fortunes lie in the hands of so many policy makers going in so many different directions over there. We've got enough of our own worries about how politicians will handle debt and budget battles.

But I'm aligning my mood for now with the picture above that tells me things will work out.

Kevin Cook is a Senior Stock Strategist with Zacks.com
 
Zacks Investment Research