In an investment atmosphere seemingly devoid of any rational order, major indexes moved mountains today as the S&P 500 jumped 4.33% while European indices posted big gains as well. The dollar also depreciated slightly against the Euro to $1.34/Euro.

Notably, the VIX tanked to fall to 27.63. Also, the 10-year Treasury bumped up to a yield of 2.07%. However, we are by no means in risk off mode where we want to start adding on equity ETF exposure at an accelerated rate.

Today’s exuberance appears to largely be driven by a coordinated effort among major central banks – US, England, and Japan among others – to provide much needed short-term liquidity to European banks.

To do this, central banks lowered interest rates on dollar denominated loans so that the ECB could then more easily borrow and then channel those funds to major European banks, who heavily engage in dollar transactions that have become increasingly expensive amidst the current turmoil. There’s no denying that we’re in a danger zone with the extent of these emergency actions.

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Perhaps investors came to the realization that all is not well in Europe as markets simmered down. The S&P 500 inched up only 0.22% while Europe and Asia posted marginal gains as well. The dollar still remained at $1.33/Euro, and commodities bumped up a little.

Also, the VIX fell once again, dropping 4.64%, though still above the 30 level. Some risk has been shaved off, but we’re still in risk on mode. There’s plenty of volatility hanging around as Europe’s fate is up in the air. Equity ETFs simply aren’t very tempting at the moment in this type of environment.

Meanwhile, it looks like Europe will require serious help from the IMF as EFSF expansion plans have been faltering. However, there was a statement saying that the EFSF will insure 20-30% of investor losses and plans on intervening in markets next month. Unsure of whether they can leverage the EFSF to over $1 trillion, most European leaders concur that IMF assistance will be necessary to aid countries overburdened with debt.

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In case you missed it, here’s a summary of the ETF topics and market reviews I posted to my blog during the week ending on 11/27/2011.

Another drubbing during the holiday shortened week pushed the S&P 500 down by -4.7% with the Domestic Trend Tracking Index (TTI) sliding into bear market territory by a scant -0.42%.

As I posted on Friday, I will watch market activity for a day or two to determine if this move below the line holds, before issuing the final domestic ‘Sell.’

Europe’s debt crisis is worsening and options to solve it seem to disappear by the day. Despite many news stories pointing out that the U.S. is somewhat insulated, I simply don’t agree and believe that domestic markets are living on borrowed time and will be severely affected by any Black Swan event coming out of Europe.

This week, we covered the following:

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