EU Central Bank will Fail on Collecting Anything in the End

The Greece deal outlined on Sunday will never lead to repayment to the banks and unfortunately at some point the weaker links in the EU will have the same economic failure as the Greeks.  The EU will shrink to a small collective with the fallen members making their way as outsiders. The Euro was a currency created as a pipeline for the EU central bank to originate loans to members on one hand and to more easily make claims on assets on the other.  Economic dramas will continue to erode the EU in what was basically a flawed idea based on a concept that a common currency would magically be able to hold together so many uneven nations.  

As for Greek leadership, they are really bad at playing the decision game.  If the Germans would not modify their rigid position then Greece had no choice but the default and play out the hard end. They can only take solace in that the game they are playing has few winners.

Market Fatigue

U.S. indexes may be too tired to take out the May highs.  Then if so, any rallies are just pauses before the next break and the the 2008 decline pattern is still intact. Back then the markets continually provided opportunities to sell as the bulls refused to die.  Eventually the battle lines became a rout however as it all descended into year end lows.

Now pattern recognition has its place in trading and certainly many from HFT to more passive minds have attempted to deliver returns based on mining the approach.  But is usually disappoints.  Big data's snooping approach in the area has been a big dud so far but the tweaking will undoubtedly continue.  

So Greece and China may just represent a part of a story of fatigue.  The former tired of lifting bad paper and the latter exhausted from central planning.

Greece, China, and EU

Markets banging around as Greece and surprisingly to a lesser degree, China, make all equities holders a bit uneasy.  China using all the tricks they tried in the US at the time of the crash of 1929.  Galbraith's book "Great Crash 1929" is great reading and illustrates the absurdity of orchestrated efforts by brokerage.  You can bet these same folks were talking about stopping the declines by raising pools of funds and at the same time selling theirs through someone else.

Greece has a bit of a different significance.  It represents the ability of banking in Europe to keep in place a system where the top has no risk and everyone else has to step out.  Greece should play the banks and look for relief through hard talk regarding the weak link now being created by bank hardliners.  Shine a light on the next stumble and its devastating potential to the EU.  They will pay to shut you up.

If Zero Becomes Prohibitive Favorite

Trend confirming models, (confirming the UP), rolled over in March and April.  Greece is the possible event action which becomes the weak link revealing some of the structural price soft spots created by central banks interventions. Chasing greater returns works until the price action is negative enough to establish cash, (zero return), as a prohibitive favorite.

Central Banks Buy Indexes To Support World Markets

Sovereign buy programs supporting market today as they apply the short squeeze to all those to challenge central bank authority.  Index futures are the easiest target as central banks support the indexes and to soften the impact for the other leg of the trade which is to be the raising of U.S. interest rates.    It is all positive on prices as long as the buying continues because the rest of usual buyside pools are empty.

Greece Markets

Markets waiting for Greece to be 'enabled' again, after all it is no different from the Fed bailing out an entire generation at the top under the guise it is best for everyone.   Bernanke and Yellen some how see their efforts as courageous acts saving the economy but they are really nothing more than supports for a broken system which not surprisingly provides excessive relief to the privileged.  Risk has been identified as any negative deviation from a positive equity curve.  Such power given central bankers who have achieved great career success by simply showing up everyday without ever taking any risks.  Risk voyeurs.

The landscape is rapidly changing for all human inhabitants.  Totally connected all the time is bringing forth specialized skills and minimized opportunities.  Markets have long gone from open outcry to electronic trading, except for some options markets which may confirm to many that those markets are useless.  Traders now circle the action online at various speeds but there are only two speeds really; hyper speed and everything else. Trading shops 'Quanting Up' to build competitive strategy teams which end up resembling bad sports clubs marked by occasional wins but primarily mediocre performances.

CNBC is proof, because who else would watch it, that there are enough online trading participants using badly canned trading and analytics platforms who enjoy listening to folks bark like a carnies using information bias which have to be used only as a daily fade.  

   

More Than A Correction

Markets trying to fight off recent sell-off.  This has been the first time this year where stock indexes are selling off with trend indicators turning to a negative bias hinting at more than a correction but the beginning of a major move downward.   AAPL one of the first to indicate negative trend warning.


Last Friday's CoverRisk.com data.

AAPL Trend Indicator/ Down

Call Veracity YTD

23

Call Veracity Run 2008 – Present

113

Event Price

57

Weekly Close

128.65

AAPL YTD

18

Run Performance 2008 – Present

100

Range Momentum

Stocks and indexes so far this afternoon reversing the downside action of yesterday.  Much of the trade has been like this with momentum nerds continuing to dominate daytime action.  Greek troubles will play with prices but it is hard to get the bulls into a corner.

Tech stocks such as AAPL, cash giant machines, with overpriced stocks to accommodate all who wish to enter,  have event price spreads nearing one and half times value.  There is not enough money in the system to pay off all the longs and some will have to eat at cheaper prices.  If you paid, or better, lent AAPL 110 at the beginning of  the year, you our now looking at 19.5% return and a 370% return since Jan of 2008.  Cheerleaders waving the AAPL flag forecast much higher prices but always have that upward stare.

Economic growth remains dull but Fed is determined to raise rates unless they can find another excuse to keep assets juiced.  

A CoverRisk.com  indicator for determining downside potential has reached the strongest level since May of 2008.  In fact it was seven years ago on May 19th, 2008 that the SP500 reached the highest price it would hit for the rest of the year.  While the indicator simply measures  the spread between various upside scales, it has only been this high on one other occasion which was proceeding the break in 2008.

The Four Quarters of the Apoclypse

Data from CoverRisk.com