The story of the week was obviously the very public proclamations of unconditional, lifelong Euro zone support by everyone seemingly except David Bowie, Roger Federer, Daniel Craig and Her Majesty’s corgis: Holly, Willow, Linnet and Monty.

The week started out with a continuation of higher European debt yields, a falling Euro, and some quite remarkable equity market declines in some of the “peripheral” European countries. The U.S. market started the week with fairly ugly action and ended up with a “Euro surprise rally”, hitting levels not seen since very early May. What made the week all the more “interesting” and challenging was AAPL’s earnings report, which threatened to throw futures over the cliff Tuesday night and in the Wednesday pre-market.

For the week the Dow was up +1.9%, the SPX +1.7%, and the Nasdaq Comp +1.1%.

Of course there were just a few other stories, including the GDP report, global economic data, Fed-watching, and a slew of earnings reports, so let’s get to it.

"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough." --ECB President Mario Draghi

"Finally the markets have forced the ECB and the euro group leaders to begin to make statements that the market really wants to hear." --Reuters, quoting Peter Cardillo, chief market economist at Rockwell Global Capital in New York. (We love the way they attribute policy decisions to the “market’s commands”).

“German Chancellor Merkel and French President Hollande held a phone conference Friday and released a statement saying they are ‘deeply committed’ to the euro zone and ‘determined to do everything to protect it.’” --The Wall Street Journal Europe, which further reported that, “Mr. Draghi will meet Bundesbank President Jens Weidmann in the next few days to discuss the possibility of the ECB buying government bonds simultaneously with the euro zone's bailout fund. An ECB spokeswoman declined to comment on the timing of any meetings between the two, but said such interactions are nothing special between Mr. Draghi and other officials.”

The weekend news outlets and blogosphere has speculation all over the place on whether or not Germany and the ECB will truly see eye to eye in the near future on following through on Draghi’s promises, the state of Spain’s bailout and some threatening noises about Greece again and its failure to meet bailout requirements. It truly has reached “theater of the absurd” status in terms of the market’s headline-induced gyrations and we think Zero Hedge summed it up pretty well, “DRAGHI SAID TO GO TO BATHROOM. Algo's confused but buying just in case.”

"We're reading the same speculation about a new iPhone as you are, and we think this has caused some delay in purchasing.” --Apple CFO Peter Oppenheimer on AAPL’s 3rd Qtr. conference call. AAPL, as you know, had a very rare “triple miss”, missing the wildly optimistic high end EPS and revenue calls, the “whisper number”, and the even the “consensus” number, but beating its own low-ball forecasts. There were any number of post- earnings pontifications, ranging from “fire Tim Cook” to “buying opportunity of a lifetime”. Forbes raised a couple of good points, saying: “Apple did post the third best quarter in its history and if Q4EPS guidance is added to the actual earnings of the previous three quarters of the year, Apple will exceed last year’s earnings by over 65%.”

"What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, and have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail.” –CNBC interview of former Citigroup Chairman and CEO Sanford "Sandy" Weill, the generally acknowledged architect of the modern “one-stop shopping” bank and Jamie Dimon’s former mentor and then ex-employer. In related news coincidentally, JPMorgan Chase recently announced some divisional realignments, which purportedly will enhance risk management and “checks and balances”, among other operational objectives (Thanks to both Sandy and Jamie, but it might be only about a decade too late.)

“This week’s GDP report further gave evidence as the weakness of the Obama recovery, about one half of a “normal” post WW II recovery and about one third of the ‘Reagan Recovery’”. --Larry Kudlow on his Saturday radio program. (Barron’s lead column had a similar analysis this weekend, so we can’t blame Mr. Kudlow, a former Reagan administration official, for more than his normal anti-Obama policy sentiment).

"The SPX cleared its hurdle near the 1,380 area, while the Dow shot above the round-number 13,000 level. Both respective indices have taken out their previous June and July peaks, which is a good sign for the market as July comes to a close." --Schaeffer’s Investment Research, and many others talking the same, although a fair amount of bears ready to reload, especially on the Euro. Barron’s options columnist Steven Sears said, “This market has been so tough even a skunk couldn’t make a cent. Most investors continue to trail the benchmark indices.” (Not so sure what the skunk reference means but the market does continue to skunk bulls and bears alike with the whipsaw action. Jim Cramer was commenting the other night on how the early morning futures have been tripping more people up than usual, something we have noticed as well).

"When we have the opening ceremony tonight and we tell the world that eight of the world's top 10 sports were either invented or codified in Britain – and only two in America – I hope Mr. Romney is watching.” --Britain's Culture Secretary Jeremy Hunt, the cabinet minister in charge of the Olympics, according the Huffington Post. Romney, as you have heard, “insulted” the Brits by questioning the preparations for the Olympics, which truly was a head-scratcher. Some bloggers were calling Romney’s trip abroad a ‘gaffe-fest” and comparing it to National Lampoon’s Vacation movies.

“It was another very busy week on the earnings calendar with 173 S&P 500 companies reporting. The EPS beat rate fell to 59% from 77% last week. While the season-to-date EPS rate for Q2 fell to 71% from 76%, it is still largely in line with the 72% four-quarter trailing average. The revenue beat rate fell to 40% this week from 45% last week. This pushed the season-to-date revenue beat rate down to 42% from 47%. Note that the revenue beat rate for Q2 continues to run meaningfully below the 63% four-quarter trailing average.” --StreetAccount (and yes we know this is a repeat from yesterday but some readers may have missed).

“As celebrity wedding announcements go, North Korea's was terse. It was probably also three years out of date.” --AFP News, remarking on the announcement of North Korea’s Marshal Kim Jong-Un marriage to Comrade Ri Sol-Ju, which some reports say actually happened in 2009. (Jong-Ju sort of has a nice ring to it, but doesn’t quite rival Brangelina, TomKat, or Bennifer.

“I thought that the statue had become kind of a symbol, kind of a lightning rod for the controversy that had erupted over the last eight months. I thought that it was an open wound for the (victims).” --Penn State President Rodney Erickson on CBS’ Face the Nation on the removal of Coach Joe Paterno’s statue. Erickson added, however, “From my standpoint, I see the coach’s contributions to the education life of the university. We will come to understand that he had a very important role over the 60 years in our education. Nothing will change that part of Coach Paterno.” (many would disagree).

Ok, we will try and put a wrap on it there as we prepare for a week including more earnings and the FOMC and ECB announcements. Some are calling it a real test of “reality versus perception” on the market’s dramatic response to the European pronouncements. Reuters called the next two months and especially September, “crunch time”, but we think we have heard that one before.

Doug Kass said, “The fundamental problems facing Europe cannot be resolved by bond purchases alone. While Draghi's rhetoric has more volume than usual today and yesterday, there is a lot of heavy lifting ahead, especially within the context of the numerous challenges facing Italy and Spain in their quest for economic growth and in their much-needed debt financings.”

And MarketWatch is reporting today, “Treasury Secretary Timothy Geithner will meet with top European leaders Monday in a whirlwind visit to the troubled region.”

Before we sign off we will throw out just a couple of Olympics-inspired questions, as we just can’t seem to escape the coverage:

-How remarkable is it that South Korea’s world-record-setting archer and gold medalist achieved this while legally blind? (one has to salute this great effort but we won’t be putting apples on our head any time soon).

-Were filmmaker Danny Boyle’s opening ceremonies awe-inspiring, creepy, mundane, boring, cute, whimsical, spectacularly creative, eccentric, unabashedly British or all of the above? And how much did they pay all those “extras” or were they all volunteers?

-Isn’t is just a bit whiny for the British cycling team to blame others, especially “the negative tactics of Australia”, for their loss in a 140 mile road race? Isn’t that enough time and mileage for a team to “ride its own race”?

-And why does Day 3 already feel like Day 9 of the Olympics? Or is it just those 60+ hours of TV coverage per day and all those backstories? And where the heck did Ryan Seacrest come from?

Good Trading!
David W. (aka The Underground Trader)

David W’s Option Income Generator. service is designed to help tame market volatility by producing monthly income via a proprietary buy-write strategy. Check it out today!