Dow likely to fall 500 -700 points. EU summit a failure but market still cheers it.

EU summit may be over but the crisis is not over. Here are the outcome of EU summit:

• A cap of 0.5% of GDP on countries' annual structural deficits
• "Automatic consequences" for countries whose public deficit exceeds 3% of GDP
• The tighter rules to be enshrined in countries' constitutions
• European Stability Mechanism (ESM) to be accelerated and brought into force in July 2012
• Adequacy of 500bn-euro (£427bn; $666bn) limit for ESM to be reassessed
• Eurozone and other EU countries to provide up to 200bn euros to the IMF to help debt-stricken eurozone members.

The detail and agreement from this summit will be implemented by March 2012. The only positive outcome was 26 countries were united to save Euro. We'll come to know next week whether whether the market has fooled Euro zone leaders or the EU leaders have fooled the market one more time. I still think EURO will fall to 1.29 soon. 

The stock market like stimulus or quantitative easing. Overnight when the Euro fell to September lows the rumor started China is going to provide 300 bln dollar to US and Europe. There is no official confirmation.

China finance minister meeting begins from Monday and since CPI fell down, the market is now expecting stimulus from China.Tuesday US Fed FOMC begins and the market expectation is QE3.

I would still not recommend keeping any stock overnight at this level, just wait till Tuesday FOMC minute results out at 2 PM EST.

My prediction is based on charts and technical level. Till now, I can confidently say, I have got the maximum prediction right in this market compared to any analysts on any news channel.

1 year comparison of Dow and EUR/USD

Today Dow was up by 184 point, but Eur/Usd closed at 1.33800 and Italian 10 yr bond yield at 6.36. Both this data didn't show the kind of faith stock market showed. With today's rally, Eur/Usd should have closed above 1.35 and Italian bond yield under 5.70, which means either the market is overbought or the market needs to go further up to bring both the data at the right level. As per chart, either Eur/Usd needs to rally up or Dow needs to come down. With the Global economy slowing down, the chances of stock market coming down is more likely at least by 500 - 700 points.