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Monday, February 13, 2012

EU Downgrades and their mind numbing incompetence

Just as the Euro led the market today by gapping up on the passage of the Greek vote, as I suspected, it's now leading the way down and for more then 1 reason.

First the market HATES uncertainty and the lack of comments or at least constructive comments from Greece's task masters today, caused the initial uncertainty in the FX market which effected the stock market (by killing momentum and sending the market lower in to the close). If you are familiar with candlestick charting (If you are not and you want to learn, Steve Nissan's books are excellent), you understand that the market is very much like physics in certain ways, such as "A body in motion...." and when a market loses momentum, it opens itself up to a change in direction. Candlesticks like the Harami, Doji, Hammer, Shooting Star, are all examples of a market losing momentum either to the upside or downside. If you use candlestick chart, be sure to look not only at the daily, but the weekly, monthly and yearly as well, you'll uncover some clues to the market by looking where few others look.

Now we have some more news and at a brisk pace, although not unexpected as we touched on it today. Specifically, my gut feeling is that the Trokia (which at this point I consider to be more then the EU/ECB/IMF, but the northern countries such as Finland, the Netherlands, Luxembourg and last but certainly far from least, Germany) will keep making demands until they break Greece and force them out of the Euro-zone and in to default. The Troika as a whole has expressed on numerous occasions that they have no intention of forcing Greece out of the Euro, but just like a coward manager, rather then being direct and firing an employee, they choose to make that employee's life unbearable until the employee quits. That's not an elegant analogy, but I think it's pretty close to accurate. I pretty much said this today when I mentioned I thought they (Troika) would keep moving the line in the sand to ultimately save face and say "We did everything we could, but they just wouldn't go along".

As for the events that are causing the Euro to look like this...

 At this point the EUR/$USD pair (or the Euro long) has now retraced all of Sunday's opening gap and is lingering around Friday's New York close around 4 p.m. (the red trendline represents Friday's close).

Here is what the Euro has done since 4 p.m. EDT today, the red arrow is the break below Friday's close, note the momentum to the downside just before the break as the candlesticks are red and longer.

As for the news, and after a slow day, it's coming in fast and furious:

From Kathimerini:


"Finland may sign a deal on securing collateral in exchange for its commitment to Greece’s second bailout in the “next few days,” Finance Minister Jutta Urpilainen said on Monday."


"A vote in parliament on Finland’s participation in the bailout could follow next week"  Tick, Tick, Tick, the clock is running out. Greece does not have until March 20th to get a deal done, the deal must be done yesterday to get all of the bailout logistics in place. 


"Finland, one of four AAA-rated euro members, last year became the only nation in the currency bloc to secure extra assurances that its commitments to a second Greek rescue be repaid by insisting on collateral.
In return, Finland agreed to pay its contribution to the permanent rescue facility, the so-called European Stability Mechanism, up-front.

“I hope we could sign the collateral agreement in the next few days,” Urpilainen said. “These conditions must be fulfilled before Finland’s parliament can give a green light” to a second Greek bailout."

Other then the delay in negotiating yet another deal on collateral, getting Finland's approval and Greece's approval (Lord only knows what they will demand- I say the Pantheon/ Acropolis  is a starting point-nothing like stripping away Greek pride and identity), the next issue will be what Germany and the others in the Northern Alliance will ask for= FURTHER DELAYS.

Apparently the finance ministers who meet on Wednesday, which was supposed to be the day that they approved or didn't approve the Greek bailout (my head is spinning with these dates as Germany is supposed to vote on it, Finland is now set for a vote, so how can the finance minister approve something that the individual respective countries haven't even completed votes on?) are now demanding that additional conditions be met by Greece before the finance ministers take up the topic. Exactly what these new demands are, who knows, but they are in some part seeking evidence that Greece has started to implement reforms. What the conditions are, how they are deemed to be met and how Greece can do that in such a short period of time are mind-numbing, which just reminds me not to get too caught up in all of the drama because it seems the Euro-zone has already decided the Greek's fate. And what was Samaras doing today when he voted for the measures last night and then said today that they would be re-negotiated after April elections? That alone would seem to be a deal killer if there ever was a real deal on the table. All I can think of is he's setting himself up for the election as a populace leader, despite the fact he voted for the reforms. It's just too surreal to believe.

In any case, the bottom line of the additional demands which have not been formally spelled out yet, seem to rule out any decision on Wednesday's finance minister meeting. 

Moving away from Greece, I expected some more downgrades, but I expected them to be financial and from the S&P, imagine my surprise when Moody's just let loose:


Rating agency Moody's warned on Monday it may cut the triple-A ratings of France, the United Kingdom and Austria, while it downgraded the ratings of Italy, Portugal, Spain, Slovakia, Slovenia and Malta. (Spain was cut by 2 notches, the rest by 1)

And to round things out, Luxembourg's Finance Minister made a slew of comments about how Greece doesn't belong in the Euro-zone if they can't comply, that if they default now it won't be as serious an issue as it would have been a year ago and finally that the US should contribute more to the IMF, which as we all know, is a NON-STARTER.


And to think, I haven't even started on the internals today which weren't very good.














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