I started writing about the situation in Greece in this space several months ago. I've described the situation and tried to provide a guide for exactly why I noted a few months ago that the likelihood of riots in Athens by summertime was quite high. I want to take a step back though from the specifics of the situation for a moment to simply describe why this is important. It literally sickens me after I've seen images of protesters clashing with police and members of the Greek armed forces to the point where innocent pregnant women have been killed/trampled. It is almost as sickening whenever I hear complete uneducated and ignorant people say that Greece doesn't matter with callousness, disdain, and sheer stupidity. In the United States, we take for granted that a dollar bill is worth the same in the downtrodden slums of East St. Louis as it is in the wealthy town of Atherton, California. We take for granted that when Michigan plays Ohio State, the National Anthem of the United States is sung rather than the state songs of both states. This is not true in Europe. I have been blessed to have many European friends. Yet, I cannot imagine my French friends singing "G-d Save The Queen" any more than I can imagine the Londoners and Dubliners I know singing Greece's "The Hymn To Freedom." Thus, the entire mechanism of the euro is actually an amazing concept and an experiment which I hope succeeds over and above economics. But it always comes down to economics, doesn't it? Here's the issue: if Greece is let go out of the euro, it's a sign that the concept is beginning to fail if not already failed. It'd also effectively force the Greeks to begin using their own currency again and devalue it substantially. Imagine if overnight, your wages were cut in half (or more). The alternative is to cut wages 25% or so yet stay in the euro system all the while cutting social programs across the board to reduce burgeoning and crippling deficits. Even if Greece is spun free, there are problems in Spain, Portugal, and Italy as well as other nations like Thailand where massive bloodshed occurred once again over the weekend. These problems can (and already are) spreading like wildfire to places like Britain where the pound is getting thrashed. In the interim, as the dollar strengthens, it makes foreign goods that much cheaper...which blows an even bigger hole in the U.S. deficit. Yet, multinational corporations such as IBM potentially take an earnings hit because of slower overall growth in Europe. Printing one's way out of the problem isn't the issue either- ask Germans who used bags of marks to buy a loaf of bread in the 1930's (which set up the power vacuum for Hitler) how they felt about just printing more paper. This is a real mess- one much more serious than many people can fathom. And the U.S. is not immune. So, the next time you see tear gas being thrown at a crowd of people in an Athenian thoroughfare, really watch it and understand the seriousness of the situation- in the immediate-term, it is shaking up day trading and in the longer-run, it truly makes for a powerful question of whether the world we live in truly is all that modern.
Last night was one of the more fascinating spates of activity as I’ve witnessed in recent memory. Both Tokyo and Hong Kong closed down in excess of 2% each with Shanghai down 5% after announcing a wide array of credit tightening measures. Dow futures overnight traded down about 130 points (the nadir of the evening) just after midnight when I went to bed, but by my 4:30AM wake-up call, the indexes had recovered a significant amount of ground. Credit Suisse and Morgan Stanley recommended European stocks and UBS suggested buying German shares. The euro fell to almost 1.22 overnight, but the bourses rallied anyway (most up over 1%) following the upgrades as well as hope from a positive resolution from a meeting of European finance ministers in Brussels today. Futures have totally turned around with prices at their high of the morning as of this writing. For the day, the resolution of that meeting and performance of the euro will likely be table setters. Volume will be lighter with 70 degree plus sunny weather in the forecast in Manhattan so expect illiquidity. Focus on relative weakness plays as well as short covering on some beaten-down stocks on any whiff of positive news.
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
NBS- closed near a high
AONE- closed near a high
PTV- Apollo Global Management may acquire PTV according to “WSJ”
DEER- announced stock buyback and raised earnings estimates
BUCY- upgraded by Baird
GLG- to be acquired by Man Group for 4.50 in cash
AMSC- received $445 million contract
Bad-The following stocks have bad news and/or a weak technical pattern
TIVO- closed near a low after DISH won an appeal against TIVO re an earlier Fed decision over a patent issue
SVA- closed near a low after posting poor earnings
ADS- closed near a low
HOT- closed near a low
OSIP- Astellas raised their bid to 57.50, but that is below Friday’s closing price
LOW- poor earnings
HAUP- poor earnings
Earnings:
MON MAY 17 BEFORE
LOW PWRD
MON MAY 17 AFTER
A GA SINA
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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