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finance.yahoo.com Stocks rallied early Monday, taking their cues from Europe which rebounded from last week's shellacking after Germany's Angela Merkel opened the door — just a crack — to adopting eurobonds to solve the EU debt crisis.
"Solving the current crisis would not be possible with eurobonds, and so eurobonds are not the answer," Merkel said Sunday, The AP reports.
But the German Chancellor also said that while eurobonds are not the answer to Europe's problems today, things might change "in the distant future," which was enough to spur speculation of a thawing in her previously adamant opposition to the concept.
Early strength in stocks was also attributed to a dip in oil prices after Libya's rebel forces met little resistance entering Tripoli this weekend. Brent crude was recently down 1.3% to $107.21 per barrel while the Dow was up nearly 70 points, but well off the highs of the day.
Of course, with the S&P having fallen 16% in the past four weeks, the market doesn't need any reason to move — one way or the other.
"The markets right now are extremely rumor-driven," says Edward Dempsey, chief investor officer at Pension Partners. "They're searching for 'what's the right price?'"
Despite myriad "bottom" calls from some prominent prognosticators, Dempsey believes the "right price" is probably lower from here. And unlike most other prognosticators, Dempsey saw the current swoon coming: In early June, his firm predicted a "summer crash" was looming, as detailed in a Seeking Alpha article.
Today, Dempsey continues to see many disconcerting signs, including historically low bond yields, and the "rolling over" of both the industrial and retail sectors in absolute terms and relative to the S&P 500.
At a minimum, he believes a retest of the Aug. 9 lows just above S&P 1100 is likely.
"We'll have to see how it plays out but certainly for investors here, given this volatility is a time to step aside," he says. Noting some major bourses in Europe are approaching their 2009 lows, Dempsey wonders: "Is this a preview of what's to come for us?"