While fear fosters headlines, cash is what creates stories. And cash is the route the European Central Bank has chosen to go. Emulating the U.S. quantitative easing policies of 2009 and 2010 the ECB is choosing to protect investors first. As the U.S. learned in 2009, buying one's own public sector debt has the added effect of running stock short-sellers out, and replacing them with bonified buyers. It also has the secondary effect of easing currency trader's fears which insures stable carry markets across the globe. While companies may complain a bit over currency disadvantages, they will complain even louder when their stock prices are falling sharply day in day out while central bankers sit on their hands. Traders on the other hand don't complain much for the simple reason no one would listen. Traders observe and execute. One such observation was made by IBTRADE strategist Jay Norris who provided this chart of the Euro Stoxx 50 below, which is Europe's leading blue chip index. Norris points out the past bullish effects of QE policies on stock indices and currencies by identifying when previous U.S. Q.E. efforts were announced on the chart. We can also see on the chart that the Stoxx 50 bottomed exactly at a Gann 1/8th line 2 weeks ago. The 1/8 line, or .125 level according to the illustrious trader and analyst W.D. Gann, is one of the lowest risk levels to take a long trade from, while 7/8ths or the .875 level is one of the lowest risk locations to take a short trade from.


Dow Jones Euro Stoxx 50

I'm not exactly an avid Gann follower, Norris points out, ...but it is interesting how every now and again a market touches right on a Gann line and reverses.

The Gann line aside, Mr. Norris points out the big news of the day was in fact Trichet's strong language, and emphasis that European countries need to listen, and act. The European central banker saying European governments... to leverage the European Financial Stability Facility with maximum amount of power was definitely pleasing to stock and currency markets, particularly when coupled with German Chancellor Merkel's recent line that providing funding for European banks with questionable liquidity is sensibly invested.

And while U.S. Treasury Secretary Geithner may get little credit for the Europeans doing just what he told them they had to do, Geithner fully understands that in a world where political grandstanding is the opposite of closed door solutions, his is a thankless job.