I know things are pretty dismal and bleak for investors. Even the better than expected ISM numbers from the US cannot shore up the DOW. Investors probably feel like throwing in the towel. Threats of a double dip recession, anxiety over the problems in the Eurozone, the BP gulf leak and erratic performance of economies around the world weigh on stock markets. Nothing good seems to be happening to lift confidence.
Have you heard of chaos theory? The flutter of a butterfly somewhere in Africa can trigger a chain effect the lead to dramatic events half way around the world. I suggest a similar chain effect might have occurred with the resignation of Hatoyama...but wait isn't the resignation of a prime minister of a G7 country going to add to the host of problems the global economy is already facing???...Here is how his resignation can actually trigger a small stock market rally. For the past 5 weeks, markets have been plagued by erratic exchange rate movements. When the Euro weakens, it sinks stock markets ...when the Yen or US$ strengthens, it leads to commodity and equities selloffs. Movement in currency markets leads movements in equities....people mistake economic reports etc as drivers of stock market movements but it is currency and the carry trade dominate movements of markets.
Hatoyama's resignation has caused the Yen to weaken vs all major currencies. This weakening of Yen has reversed a vicious cycle of selling and liquidation of stocks and commodities. When the Yen weakens, it gives the economic factors a chance to assert and influence the markets helped by the carry trade.
If my understanding of market correlations and inter-relationships is right, markets should start to rally....and as usual the talking heads on CNBC will tell you it is because the US economy is strong, stocks are cheap, and Europe is now stable...but the real reason is Hatoyama resigned and that is like the flutter of a butterfly that set in motion a chain of events seen only by those who can connect the dots......