The collision of global markets and social mood

Thursday, February 5, 2015

Thursday Market Update -- Greek Keynesians, Vol & Reboots

The ECB (finally) announced that it no longer accepts Greek debt as collateral for loans to Greece. This should have been done years ago.

Greece's new finance minister, Yanis Varoufakis, is -- surprise -- just another Keynesian.

According to the Telegraph's Ambrose Evans-Pritchard,

"Varoufakis was an economics lecturer before being catapulted into the limelight as crusader against the “monumental folly” of Europe's deflation policies. An orthodox Keynesian – unlike neo-Marxists in the Left Platform of Syriza's broad church – he has taught at the universities of Essex, Glasgow, Cambridge, Sydney and Texas.

"His latest works are “Europe after the Minotaur” and a “Modest Proposal”, a play on Swift. They are acclaimed blueprints for an EMU-wide reflation drive and a lasting peace to end Europe’s debt wars. They propose a mechanism to recycle the capital surpluses from the creditor states to the deficit states in a stable fashion to prevent the EMU economy as a whole becoming trapped in a self-feeding cycle of contraction. The arguments would be recognisable instantly to Keynes, who grappled with the same issues in the inter-war years when the Gold Standard went awry.

"Mr Varoufakis is a fan of "game theory", a branch of economics epitomised by the Nash Equilibrium - the optimal outcome when each side knows what the other wants." (emphasis added)

So basically the guy is just another redistributionist. 

He's acting like, to continue with the education theme, a university student who parties his way through school and lives above his means then freaks out when his parents cut off his credit card, telling them if they only gave him more money his troubles never would have happened.

Due to Varoufakis' efforts at game theory, Greece is now on life support via the ECB's ELA (Emergency Liquidity Assistance) which expires Feb. 28th. Then the real games begin.

Sadly, they could be Hunger Games.

Elsewhere, taunt the monster and get bitten. For a long while it's been V-bottoms which one day will bankrupt a generation of BTFDippers. Now,

Vol is actually quite muted. If journalists think vol is nothing to be afraid of, then vol is what they'll get. Their 401-Ks be damned.

And slowly but surely the word REBOOT (from The Socionomic Implications Of September Vogue: 2014) is creeping in. Apparently the long knives are coming out at liberal propaganda mouthpiece MSNBC.

ES Futures:
All this European brinkmanship is great for e-minis and the euro. The ES in particular is right back to yesterday's highs where Bloomberg's new guy chimed in.

The euro has much to gain short term from a Grexit. The EU does not. One is a currency. The other is a project.

10-year note futures, once again, dwarf Globex volume. Yields in 5s once again show relative strength.

Oil is bouncing off a 61.8% retracement level on lighter volume. If volume expands as the bounce continues, it could potentially mean Game On for higher prices. NG looks closer and closer to some sort of bottom as well.

Gold is not showing much interest in getting out of the neighborhood it's in. 1239 looms if it can't rally.

S&P Outlook:
Yesterday's rally highs were made on inverted A/Ds, negative tick divergence, and lighter volume than the January 28th down thrust. At this rate, any higher high today is a sell unless A/D, ticks, and volume magically turn around.

As noted yesterday, however, there still remains a volume shelf at the 2060 area, the 2064.62 swing point, and a 78.6% retracement level at 2069.44. The market may have its eye on any one of these, and internals take second place to price.

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