Understanding this Roller coaster market ride

Right now only 1 thing matters. And that 1 thing is European bond rates. The same was true last summer and fall when the first iteration of the European debt scare took control of investors' psyches.

Then as now, the direction of the market can be quickly determined by the movement of the 10 year bond rates in Italy and Spain.

Rates go higher = fear on the rise = stocks head lower.

Rates go lower = fear on the decline = stocks head higher

With that in mind you can easily understand Wednesdays stock decline given Italian and Spanish 10 year debt soared to 5.93% and 6.65% respectively. NOT GOOD!

Keep your eyes on the direction of these bond rates. The more they go up, the more defensive (read: short) you should be in your portfolio