"En garde!" is the entreaty used in fencing that signals opponents should get ready to defend themselves from incoming foil thrusts.  It is an entreaty, though, that has a universal ring these days in the equity market because opponents (i.e., bulls and bears) need to be in a constant ready position to deal with headline thrusts from foils that don't always have a protective end on them.

Yesterday's coordinated effort among major central banks, including the ECB and Federal Reserve, to conduct three, U.S. dollar liquidity-providing operations with a maturity of approximately three months, pierced the skin of bears in an unexpected fashion.

The end result was that the bears bled yesterday while the bulls ran over them, stirred by a sense of hope that policymakers in Europe finally get that they can no longer drag their feet in efforts to prevent systemic risk in Europe's banking system. 

Drag your feet in fencing and you'll likely trip, falling on your foil at worst or leaving yourself vulnerable to a scoring touch at best.

The question today is, will European officials stay on the offensive or will they merely offend with vague promises to work together and no concrete solutions?  Worse yet, will there be public dissension in the official ranks that puts capital markets back on their heels again, as the thought of a disorderly default and/or a run on the European banks leaves them off balance?

EU finance ministers are meeting in Poland today to discuss solutions (we hope) for dealing with the sovereign debt crisis.  U.S. Treasury Secretary Geithner is also there given his experience in dealing with a financial crisis.  Expectations are high that he will not only counsel, but also convince, his counterparts to craft a TARP-like solution for the European banks.

Already we are hearing conflicting reports about the extent to which such an idea is being considered by EU officials, so we won't fan any flames here, but there is an underlying sense of angst about any communique that might result from the meeting.

Just like in fencing, momentum can quickly turn on a single foil thrust that either hits or misses the mark.  Stay tuned.

For the time being, market participants are exhibiting some reserve following a four-day rally that has seen the major averages surge between 4.0% and 6.0%.  The S&P futures are trading in-line with fair value.

Presumably, some profit taking following this week's run is expected by participants who will be reluctant to hold positions over the weekend, knowing the risk is there that they could get hit with a headline thrust before Monday's open.  For them, they'd rather be "en garde," conceding a scoring touch today perhaps on the basis that they could soon go on the attack again on Monday.

Separately, this is also a quadruple-witching expiration today, so some volatility is expected with the expiration of stock index options, stock index futures, stock options, and single stock futures.

The expiration should ensure that trading volume is heavy, but it will be the developments in Poland and the remarks from EU officials in coming days that will determine whether the bullish run this week will soon be foiled.

--Patrick J. O'Hare, Briefing.com

Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.