In spite of the come-to-be-expected volatility last week, stocks were generally up, with the S&P 500 higher 1.3% for the period. The primary theme continued to be the tough situation in Europe, so Friday’s surge upward appeared to be supported by investor encouragement that the pro-bailout conservatives would win in Greek elections over the weekend. Getting their wish, there is an opportunity for that optimism to carry forward this week. A couple of caveat’s could still stand in the way. First, the larger economies, such as Spain and Italy, matter much more than Greece, so we’ll be watching the yields on their bonds. Higher/lower yields would tell us what investors really think about the prospects for problem resolution. Second, with the S&P 500 near resistance levels in the 1340 to 1360 area, action this week may tell us if markets are prepared to break through and move higher, or if the levels serve as a wall that keeps them in the narrow trading range we’ve been in for some time. There is some housing data and a few economic tidbits, in addition to a Fed meeting this week, that could help sway markets, but the European soap opera is still the attention getter.
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