The news over the weekend was bad regarding any possibility of a settlement with Greece, thus the markets in the Euro zone were getting hammered when trading opened up last night. We followed along as usual, and, as usual, we weren't as bad as they were, which is totally understandable, but we were down hard enough to make folks feel that nasty feeling in the pit of their stomachs, especially those overtrading in a risky environment. I had warned repeatedly last week that the risk was running higher and higher each day as we headed towards the deadline of June 30. That was the date when Greece had promised to bundle all of their payments in to one large payment. They made it clear that wasn't going to happen and that's when the negotiations began. Unfortunately they didn't go well and this is the result. We were lucky.
If we had followed the losses on a percentage basis from the Euro zone, we would have been down close to 700 Dow points. Imagine how that would have felt! So today was bad, and it threatens to get worse if we don't get a resolution by tomorrow to clear it all up. I am not an economist, and offer no solution. The world wants one, and the fact that they aren't getting one, means there is no easy solution. That is deeply troubling for all concerned. If things don't get better in the next twenty four hours today may feel like an up-day. Tick, tick goes the clock, and possibly the end of this bull market. At least for a good while anyway. The rubber meets the road in the next twenty four hours. Be careful. Don't be greedy. You may get away with it but if you're wrong it can be ridiculously painful. Do what feels right to you, but this is a situation where the leaders of the free world still have no solution. Let's hope they find one, but you know the risk.
Not only are we dealing with Greece, which unto itself can cause a bad experience for the bulls, but we're also dealing with massive froth again, and worse yet, horrific looking weekly and monthly charts. The bull-bear heading in to this week is still in the 30's as a percentage, and that's just not good. The monthly charts in particular are a complete disaster technically, but slower to play out, of course. Greece's financial problems can become a total disaster for the people of Greece, and for the stock markets around the world. There are many potential catalysts to the end of this bull market for the short-term at the very least. Greece is the excuse in the moment, but there are other factors in this market decline. I've had to look at those awful monthly charts for too long now wondering when they would ever play out and that time may yet to be upon us but oh how nasty they truly are.
When deciding how to play this game you take the risk reward factor based on many different things and come up with a decision on how to play. All I can say is the risk reward for the bulls isn't on the good side of things. That said, a positive solution to Greece and we're up 300 points on the Dow tomorrow. While that's true just know that there are a lot of bad things out there for the bulls at this moment in time. Risk reward for the bulls isn't the best we've ever seen may be the best way for me to put it. I don't want to scare you off. We can be up huge tomorrow but I still hate the level of froth and I still hate those monthly index charts. Let's hope Greece settles quickly so we can learn more about the markets headaches from froth and those monthly charts. It would be good to see if a settlement in Greece can allow for the breakout above 2134, or if the other problems are simply too big for the market bulls to deal with.
From a purely technical perspective, we look to S&P 500 2040. 2051 is the 200-day exponential moving average and then we hit the triple horizontal bottom at 2040. If we lose 2040 with any force, and if that level stays lost for several days, the bears will get very aggressive. The market could get hit very hard if that occurs. In a way it would be best if it did as froth would finally go away and likely would so for a long time. It would also be the beginning of allowing those nasty monthly charts to unwind some. Never count the market out as anything can occur such as a settlement or better still the fed doing something even more inappropriate than ever before to prop up things. I don't know what that would be but her aids are informing her of that 2040 level, so if that starts to go away with force then you'll likely hear something silly once again. The Fed is desperate to keep those 401K's alive, because she understands how fragile this economy really is. If she loses those 401K's she loses the economy altogether. Tough times for her, but it's mostly self-created.