Darshan's Blog

Darshan's Daily Ma rket Ponderings

Hi...Anyone remember Greece?

Wednesday February 17th, 2010

Afternoon all. Apologies for my absence the last couple of days been under the weather. You could say Greece was under the weather last week too but as we announced yesterday, all is well again. Yes that's right, we've gone from total media hysteria one week to total calm, the next. Ah how refreshing to see nothing changes in the financial world same old games.

As we left it last week, the ECB had the market hanging on, waiting for the next word. That word was due out yesterday. The Germans reiterated that though they were not thrilled on lending support, they would be there if needed. So nothing new there. However, what really caused everything to be okay then?

Simply put Greek Finance Minister George Papaconstantinou told the world that there was no need for a bailout. (His words, not mine). Greece has not asked for a bailout...there is no actual need for it. . So where was he the last couple of weeks? Ladies and gentlemen welcome to the world of poker. Trichet played it last week and now the Greeks are playing it. In the meantime, the big guys managed to squeeze those that are short equities. You guessed it, right in time for Options Expiry this week. Geniuses! (More on this in a bit).

Why did the EU finance ministers believe him? Well simply put, they have asked him to work out a way of reducing the shortfall by March 16th where no doubt, the market will be held hostage again. So how is Mr Papaconstantinou going to trim Greek's huge budget shortfall (a deficit that is 12.7% of GDP might be large but pales in comparison to the good old UK just saying) ?

Well he has stated that there are 'no specific additional measures' planned. Then you dig deeper and you realise he is bending the truth yet again. This is a man trying to bluff his way out of trouble. At the same time as telling the world that nothing is wrong and that no additional measures are needed to fix well - something that supposedly doesn't need fixing he then reveals new financial reforms yep those suggested by the EU ministers. What are the biggest points on his reforms? Well anything that will increase the coffers of the Greek treasury by a projected 800 million Euros.

Well while the market loved this news the investors holding Greek debt, weren't as excited. The yield on Greek 10-year debt increased to 320 basis points, up by 15 basis points in one day.

We shall how this plan works. Remember, the aim is to reduce the deficit over the next three years and bring Greece within the EU's 3% of GDP rule by 2012. (Fat chance).

Either way, the market for now has decided, much like Dubai last year, to ignore the issue. What's happening instead is that all the markets are rising to key resistance levels. Gold is my clue at the moment and it seems to be holding resistance at 1130 so far. If it breaks that, then 1150 is the next level and it will drag the markets up with it. If the Dow breaks 10300, it will be heading higher towards 10500 before breaking down to lower targets. If the SPX breaks 1105, then it will most likely head towards 1130 before heading down to 1000 and if the FTSE breaks 5300 then it may head to 5350 and then 5405 before heading down to 4950. Remember the end goal here is for the big guys to spring a bear trap and take us to new highs before summer. So this is why I keep banging on about being careful if you are short -always keep stops tight, obey levels and keep your discipline.

We need to get OPEX out of the way and I have a feeling that we will start heading lower either Friday or Monday. It could even be as early as tonight, if all the markets respect their resistance levels. That will all come down to the FOMC minutes tonight. Remember, in the last statement, Kansas Fed President, Hoenig was a dissenter and thinks the US is getting carried away with the loose monetary policy. He was clear that the unsustainable federal debt is going to threaten any recovery and must be rained in. It will be interesting to see what he had to say and it might spook the bulls.

We shall see. Remember those levels above and play wisely. If you have any questions shout!

Stay safe today and happy trading,

Darshan

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