Greek vote is start of climb, China is on the real cliff

Greeks are climbing an Economic Mount Olympus and the Chinese market could be sitting on the edge of a cliff.

Presently, the US news has pushed the trader investor into missing the biggest news item that will have a large effect than the referendum this past weekend in Greece.  The news has cycled over and over on how Greece is voting on accepting austerity proposals from basically Germany and France.  Greece owes them a total of around 170 billion dollars.  Other countries since 2010 have contributed billions too, but as they are also in default and collateralize d their debt with junk bonds pushed into the European Community, in the short term they can wait to see how to follow if Greece takes on this arduous trek to a new economy.  It is not like the news pictures it as a jump, a fall from Europe, but more of a political 1 foot forward two steps back until Greece commits to their future through their own currency.  They are climbing Mount Olympus not jumping from a cliff.

Looking at the pullback in the US markets, I would attribute the long term direction more to what is happening in China.  China is the 800 lb Gorilla sitting on the financial markets.  The Bank of China has just dumped 20 billion dollars into the market today, and the total loss to the Chinese markets this past month is in the Trillions of Dollars.  Much more than the combined values of all the PIGS debt.  This 25% correction in the market has not exhausted.  If there is any indication in past major corrections their could be a 50% correction.  I think the BOC will definitely step in with more support and extend leverage to stock holders but this is setting a very bad precedent in the market.  The market clearing process of selling too much, moving to an oversold condition opens up the opportunity for new money in and inefficient, non employee-centric businesses to be cleaned out.

Trading Plan – Stay away from overnight holding of equities, short term trading only.

S&P500 emini futures showing support on the 200MA moving average.  Buyers and sellers had a capitulation before the move down showing seller exhaustion.  Strong buy on today’s market with next major support at 2032, 1009 then 1957.50  News out of China could be big and set off a few international market makers that might be shorting.  Watch for a break above 2100 and then some consolidation.  If Greece folds and the BOC covers the market, then we could rally through to August.

Gold, the Catastrophe hedge is weak.

There is a shift coming in the markets, and the risk off trade is slow, the catastrophe hedge GOLD is weak, Silver even weaker.  Copper had an almost 4% change in price today to the sell side.  Mortgage rates could be going up in the US in September, probably to be delayed to November or a slow sales moving month. For each half percent, an estimated 200,000 home buyers will be knocked out of the market. Home prices also correct when interest rates go up, so all these new buyers afraid of getting a higher rate are buying at the top of the market…..

Greece is going to have to climb mount Olympus to get their new economic fire and it is going to be a long hike.

The Sky could be falling, the referendum on July 5th is adding some volatility to the US and international markets.

We are sitting on the brink of some amazing changes that could be brought about by the Exit of Greece, from the Euro. Iceland previously held a referendum(in 2011) asking the people if they wanted to guarantee 2 Icelandic banks . European governments put pressure and all types of doomsday propaganda about how Iceland will loose its standing in the world. The vote was close to 60% against the guarantee. Iceland moved out from the pressure of the banks and let the business fail but kept their integrity and Iceland has been doing well since then.

It is a courageous step in the climb, and the pressure the Greeks are under both physically and psychologically must be huge and the hangover for the party in the streets just as big. In this, we might see some of the abhorrent corruption of our banking systems corrected. In the US, it seems we have not learned from our mistakes and have let the banks become our political masters, controlling our commerce, our industry and future taxes.

I remember in the 70’s when we had anti monopoly laws and policies, we broke up the “Bells”, we monitored the banks, we had mistakes but we had a sense of business that was to serve people, not as a business entity treated like a person that can not be held accountable. No banks or bankers have been charged and held responsible for the instruments they sold back and forth that created the largest transfer of wealth from middle class to the wealthy. The 2008 Financial Crisis will be small compared to what is in store for the markets in the futures.

As each of these begin to unwind, the Grexit, the Italian, Portugal, Spain exit that could follow. Eastern European countries unwind and their debt skyrockets, the baby Grexit in the US with Puerto Rico, Cities unable to pay their pensions with out issuing more debt(bonds) and of course the Ponzi of Treasuries and Bonds as the world looks for a source of safety and to take risk out of the markets.

The changes could be fast, the market could clear these fraudsters out, there could be a new start for many countries and cities. The fear of such a choice is often larger that the actual consequences.
We shall see…..

So What is your PlanB?

Remember to always manage your risk first. If you don’t have money to burn, stay out of these markets.

Joel Wissing

Money Maker Edge™

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