EURUSD as well as ES Futures rallied this evening based on headlines that Euro zone strikes deal on second Greek bailout package.
This is an example of noise. Don't believe the hype.
For example the Reuters article states that, "...a second bailout programme for Greece includes new financing of 130 billion euros and aims to cut Greece's debt to 121 percent of GDP by 2020..."
If earlier headlines that Greece will actually need €245 billion to cut its debt to 120% of GDP are true, then the decision to bailout Greece to the tune of €130 billion is completely inadequate and is just another example of serious financial problems being pushed further down the road.
Monday, February 20, 2012
More Unfavorable News from Greece, But Markets Remain Strong So Far
Haven't had a chance to post in the past week just as the markets have become interesting for the first time in 2012. What we are seeing is an overbought market entering the introductory stages of a topping pattern.
That being said, I am still bullish on the markets as of right now. However, the latest news regarding Greece makes me think twice. This morning I would have said headlines regarding Greece are only noise and any negative news would create a buying opportunity if equity markets declined. But the latest reports have to be considered as potentially more than just noise.
It has now been suggested that Greece will need another €109 billion in relief (bringing the total to €245 billion) if it is to cut its debts to 120 percent of GDP by 2020. Accepting austerity measures that would enable repayment of a bailout that large would force the Greek people into a recession that could last indefinitely. This also means that creditor countries to help fund the bailout will be even more reluctant to lend. So for the first time, I am actually entertaining the idea that Greece could default and leave the Euro. This would certainly be negative for Global markets.
Futures have resumed trading after the Presidents day holiday and the reaction has not been too negative so far. In fact, after initial selling, futures quickly stabilized and are now ticking back up. We'll have to wait to see how markets open on Tuesday to get a better idea. Greek news may continue to be only noise until the March 20th deadline when €14.5 billion in Euro bond payments must be met.
We can't ignore the obvious bullish price action, nor can we forget last week's comments from People’s Bank of China Governor Zhou Xiaochuan that China is ready to be more involved in resolving Europe's Debt crisis through the European Financial Stability Facility, the European Stability Mechanism and through the IMF. It certainly adds support to the bullish cause.
So nothing yet has changed my bias. I continue to like buying the dips. I also am not afraid to short any rallies to new highs when resistance is confirmed.
That being said, I am still bullish on the markets as of right now. However, the latest news regarding Greece makes me think twice. This morning I would have said headlines regarding Greece are only noise and any negative news would create a buying opportunity if equity markets declined. But the latest reports have to be considered as potentially more than just noise.
It has now been suggested that Greece will need another €109 billion in relief (bringing the total to €245 billion) if it is to cut its debts to 120 percent of GDP by 2020. Accepting austerity measures that would enable repayment of a bailout that large would force the Greek people into a recession that could last indefinitely. This also means that creditor countries to help fund the bailout will be even more reluctant to lend. So for the first time, I am actually entertaining the idea that Greece could default and leave the Euro. This would certainly be negative for Global markets.
Futures have resumed trading after the Presidents day holiday and the reaction has not been too negative so far. In fact, after initial selling, futures quickly stabilized and are now ticking back up. We'll have to wait to see how markets open on Tuesday to get a better idea. Greek news may continue to be only noise until the March 20th deadline when €14.5 billion in Euro bond payments must be met.
We can't ignore the obvious bullish price action, nor can we forget last week's comments from People’s Bank of China Governor Zhou Xiaochuan that China is ready to be more involved in resolving Europe's Debt crisis through the European Financial Stability Facility, the European Stability Mechanism and through the IMF. It certainly adds support to the bullish cause.
So nothing yet has changed my bias. I continue to like buying the dips. I also am not afraid to short any rallies to new highs when resistance is confirmed.
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