Late yesterday afternoon, the major governments of the EU nations offered troubled Greece a lifeline package. The package is valued around $61 billion- at below-market interest rates in an attempt to slow if not halt the Greek financial crisis- and of course to attempt to keep the euro from being the punching back of 2010. Last week, Greek borrowing costs exploded to an 11-year high. This adverse interest rate rise ostensibly forced the hand of euro-region finance ministers. The European governments as a result will offer Greece three-year loans in 2010 at a rate of about 5%- about 200 basis points below prevailing three-year rates in Greece. Approximately 2/3 of the funds will come from Europe with the remaining third from the International Monetary Fund. Basically, this is an out-an-out bailout at least in the short-term thus the value of Greek assets in particular much less all of Europe suddenly become more as the situation stabilizes. At the moment, the Greeks are holding off from utilizing this lifeline in the hopes that planned debt sales by the Greek government will go smoothly. One can be as skeptical or as optimistic as one wants to be on this whole mess. I personally question whether the same thing can and will be done for others who may need the help much less the effectiveness of it. Yet, perception oftentimes becomes reality and this is one of those cases. If things seem more placid, they become more smooth and placid. Thus, all of this may hold and it all may unravel in 2012 or sooner (or later...I don't even pretend to know). But I do know that people who thought the worst in Greece was going to happen and had short positions in Greek assets are nervous. I know hedge funds short the euro are nervous. And I know the domestic stock market has shaken all of this off for months on end. Thus, as we prepare to trade today as well as the next few days if not weeks, don't think about whether this can hold over the long-run. Realize that most savvy market-watchers have long expected this package to come about yet a lot of people and entities are aggressively short euro-related assets. Therefore be ready for some wilder than normal swings in all asset classes with the corollary that if it’s slow out of the gate, it’ll indicate that everything is factored in making for a very slow day.
Markets in Asia were mixed overnight with Tokyo up 0.4% and Hong Kong down 0.3%. European bourses are generally flat. Oil and gold are both down slightly with the dollar slightly stronger. Thus, despite my little educational novella above, we may well be setting ourselves up for a somewhat slow day pending how much hedge funds push things around (or get pushed around). The bias still seems to be to the upside with big cap techs and financials strong. Trade very nimbly today regardless of whether it gets volatile later as this seems to be the calm before the earnings storm right now and there aren't a ton of news stories or exaggerated moves.
Reiterating-
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.
If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
AAPL- closed on a high
HUSA- nice reversal in closing near a high
FRO- closed near a high in a strong tanker group
CRL- closed near a high on vague takeover rumors
CEDC- closed near a high after announcing it is going to sell its Polish distribution business
ATLS- closed near a high after announcing the acquisition of a unit from Reliant
LIWA- closed near a high
PRI- closed near a high
MDRX- closed near a high
CPKI- “WSJ” reported CPKI is looking for buyers
PRGO, BJRI- mentioned on “Mad Money” on Friday night
MIR, RRI- MIR shareholders to receive 2.835 shares of RRI for each MIR share owned
PALM- rumored to have hired Goldman Sachs to find a buyer
GNVC- positive phase I/2a trial on a preclinical malaria vaccine data was presented at a symposium over the weekend
AIG- according to “WSJ,” AIG and GS unwound soured trades leaving AIG with a loss of about $2 billion
BRKR- mentioned positively in “Barron’s” over the weekend
Bad-The following stocks have bad news and/or a weak technical pattern
VCLK- CEO resigned; also, guided first quarter revenues below estimates
EOG- closed near a low
FSLR- closed near a low
MEE- near island reversal in closing near a low after trying to reverse from recent weakness
MUSA- closed near a low
KMGB- closed near a low
Earnings:
MON APR 12 BEFORE
none
MON APR 12 AFTER
AA
Good luck today.
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner
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