After a hiatus Friday afternoon, markets have picked up where they left off since Tuesday afternoon when the FT.com reported a plan for a plan to recapitalize European banks.

  • German Chancellor Angela Merkel and French President Nicolas Sarkozy on Sunday said a comprehensive response to the debt crisis would be finalized by the end of the month, including a detailed plan to ensure European banks have adequate capital.  
  • Merkel has said that policy makers will do everything necessary to provide enough capital to banks to stem a debt crisis.  
  • Paris wants to tap the EFSF to shore up its banks, worried that pouring its own money into them could compromise its coveted triple-A credit rating.  Officials in Berlin have made clear that they believe the fund should be used only as a last resort, when euro zone member states don't have the means to support their banks on their own.
  • German news agency DPA, citing financial sources, reported on Sunday that euro zone finance ministers were working on scenarios involving a 60 percent reduction in Greece's debt.

David Cameron is channeling Hank Paulson:

  • As they met, British Prime Minister David Cameron urged them to take a big bazooka approach to the crisis, telling the Financial Times that euro zone leaders had to break their cycle of doing a bit too little, a bit too late.

As for U.S. markets, the conversation is identical to what we mentioned late last week.  That 50 day exponential moving average, near 1188, is one traders will keep an eye on as it has represented resistance for the better part of three months.  If that is broken, then the next level to watch is the mid 1220s, which is now both the highs during this selloff from late August, as well as where the 100 and 200 day moving averages are quickly headed to.

Thankfully, earnings season slowly begins this week so we have something else to talk about other than Europe.