Is The Market Consolidating?

The Dow Jones Industrial Index saw a substantial fall on Friday after the European markets were roiled by a sudden and mysterious collapse in several leading Italian banks that trade on the Milan stock exchange. On Monday morning, the news from Europe over their ongoing debt woes was much more positive however. French banks had agreed to accept a significant debt roll-over, thus allaying some concerns over Greece's ability to emerge from the current crisis.

There was also positive news from the US, with financial stocks jumping on the back of news that banking capital requirements being less onerous than expected. International regulators agreed to require the world's largest banks to hold an extra level of capital reserve but it was much less than expected.  The agreement was deliberated over the weekend in the Swiss city of Basel.

The mysterious sell off of Italian banks that was encountered on the Milan stock exchange didn't extend into a broader panic as some had feared. The welcome round of positive news saw the Dow Jones put on a triple digit gain of 109 points, finishing at 12,043.

From a technical charting perspective, there now appears to be a consolidation off a recently formed low. Recent lows at 11,900 seem to have established a floor, from which the market appears to be consolidating. Whilst there still may be further surprises in store from the European markets, a guiding sign on the difficulties being experienced in Europe has been there currency, the Euro dollar.

Over the past 24 hours there has been a strong bounce off a major support level at $1.41. The Euro has continued to rally strongly from that support level, and is trading above $1.43 at the time of writing.

With European debt concerns hopefully being bedded down and dealt with effectively, the market should start to focus anew on fundamental economic drivers like corporations reporting positive earnings results. NKE - Google Finance" href="http://www.google.com/finance?q=nke">Nike, Inc. NKE for example, reported strong results that were well received by the market.

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