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Is this market sustainable?

Some say do not fight this rally, we broke up and running, some say this is not sustainable.

Stocks around the world are exploding higher on Thursday after Eurozone officials announced a deal they hope will forestall, if not prevent, a financial meltdown in Greece from spreading throughout Europe and perhaps infecting economies around the world.

To say the deal has its detractors would be a wild understatement. Among these critics is my Breakout co-host Matt Nesto who rose out of bed like a congested Bernard King to share his doubts. Nesto dismisses today’s global rally in three words: “Knee jerk reaction.” He supports his view by citing Doug Kass’ contention that Europe needed a “shock and awe.” Nesto tells me the deal announced this morning is neither shocking nor awesome.

“What we’ve done is send a bunch of banks in Europe out panhandling, cup in hand, looking to shore up their capital ratios,” he tells me. The deal does much the same thing to European officials who now turn to China and Japan to increase the European Financial Stability Facility (EFSF) to the $1.4 trillion level they believe is needed to calm markets.

Overall the deal is short-term and largely unfair, particularly to Greek bondholders who, Nesto notes, “can’t even cash in on default insurance” because the 50% default has been labeled voluntary for official purposes.

Time will show. However, I myself do not believe in this rally and I bought puts on SPY to see the correction or downtrend.

Happy Trading!

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