Monday 6 February 2012

Consolidation or Beginning Of The End?

Depending on your outlook of the market, today's market action can be either viewed as a consolidation or a failed re-test of the previous high. So far the Analog seems to be on track.
It was updated till EOD Friday.

To continue higher from here would require more risk fuel which I do not think is available. The endless Greek drama goes on. While team Merkozy demands action Greek political parties delay their bailout talks by one more day. Per Reuters: " Speaking in Paris, Merkel expressed the exasperation spreading among euro zone leaders at seemingly endless arguing in Athens that has yet to produce a definitive acceptance of the austerity and reform conditions demanded by the lenders.

"I honestly can't understand how additional days will help. Time is of the essence. A lot is at stake for the entire euro zone," she told a news conference with President Nicolas Sarkozy.
There is huge trust deficit about the capability and intention of Greece and EZ is talking about a separate account where money will deposited for payment of interest to the creditors.

Whatever they do, Greece cannot survive in EU. The bailout money actually goes to the EU lenders, mainly French banks and Greeks themselves get to see very little of it. In another report of Bloomberg :" "Greece’s Prime Minister Lucas Papademos requested the country’s Finance Ministry to prepare a document on the implications of a Greek default, Panos Beglitis, spokesman for the socialist Pasok Party said. The Prime Minister yesterday told the leaders of the three political parties supporting his interim government that he asked the Ministry “to record accurately and realistically all the consequences of the country’s exit from the euro zone,”

Tomorrow the Unions have called for a 24 hour general strike in Greece and we do not remember any peaceful strike in Greece so far. The political parties and their leaders are going to meet and finalize their decision tomorrow?

Tomorrow is also the day when RBA comes with rate decision. It is expected that they will cut the rate down to 4%. The Greek issue and RBA rate cut could provide the fundamental impetus for "risk off".

Whether Friday's gap up was an exhaustion gap up or renewed momentum is not yet certain. Every technical indicators is suggesting that a trend change is ahead, in fact overdue but liquidity flow trumps everything. And we do not have any predictive model to determine future liquidity flow. So it is kind of groping in the dark as of now. I think we will know in the next few days where the market wants to go and if we should shed our doubts and join the buy program.

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  1. Thank you very much. TexEx.

  2. I vote for the beginning of the end.

  3. IMO, another 30-40 ES points at least before a top, and possibly more. Consolidation going on right now, IMO. I have been mostly long since 1324. Sold most shorts for a loss and am holding only a small short as a hedge.

    EURO broke out today, and Silver almost did. These should be good longs for another few days. GL!

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