The French are boasting about having downed an airplane of the Libyan Air Force, and there are more worrying news coming Japan today, as if the Portuguese government`s fall were not enough to stress the trader community. Gold is appreciating along with oil and other commodities, but this should not be seen as anything other than a reflection of the general speculative trend that has been driving their prices up for quite some time.
As the week closes, the uncertainties that have so far failed to dampen speculative sentiment continue to undermine it, but the pressure will probably intensify as the aftermath of the Portuguese government`s fall becomes clearer to traders. We do not know yet how far the repercussions of this small nation`s difficulties will reach, nor do we know how likely it is that similar scenarios will play out in nations like Ireland, Spain or Italy. These problems will remain a fixture on the picture for months and indeed years to come, because they are too big to go away in short order and are always heavy in the minds of traders as a consequence of their central role in the big picture.
One should not expect the next leg of the sell-off, when and if it materializes, to significantly alter the mood or composure of traders, because all interest is on the Fed`s actions at the most basic level. The present weakness in the market will not last for very long, because the E.U. Authorities will intervene in the sovereign debt issue soon. The Libyan crisis is likewise very likely to turn into a chronic problem in a few weeks, and the Japanese issue will naturally calm down as the nuclear problem recedes from the headlines. The Fed`s determination to keep the markets afloat will thereafter surface as the main force behind trends, and it will likely be the dominant one.
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