Because people are buying. Everyone knows Greece is bust - it's already in the price. What matters is if a Greek default spreads to Italy, Spain, Portugal, Ireland etc. The EU just announced a >1 trillion bailout plan, and currently the markets think that is enough to stop the rot. Since stocks are cheap (so long as there's no crisis/recession to crush earnings), a decisive resolution to European macro fears would be a major bull point. Remember, the ES was at 1370 in spring, and corporate earnings are higher now than back then. Without EU worries, we would be at 1400+.
Somebody wants a xmas rally. Equity selling keeps getting met with strong buying and USD selling. But USD wants to rally and stocks want to retrace. Result is chopped up charts and a BIG crash later. See blog for more. http://stockmarket618.wordpress.com
I agree with this analysis, but how do you account for the strong equity buying? The buying comes in enormous blocks, sometimes pushing indices up several points in few seconds/minutes. Who is buying?
Whilst people have rallied believing that the referendum vote isn't going to happen anymore, the ONLY reason and condition papandreou said he wouldn't do it would be if the opposition agreed to a coaltion government. However that condition is totally dead as the entire coalition stormed out of parliament negotiations with Pap, and were shouting on media conference that he is a liar, and refused to work with him no matter what. So now either tomorrow Pap wins the confidence vote, and markets crash down 2-3% which i will love so much, OR, he loses the vote, in which case Greece will be without a ruler and government, which hopefully should cause panic and chaos on the gloabal indicies. Not sure what the 3rd option and outcome could be....