Greetings,
The P.I.I.G.S. are stirring up quite a mess in EuroLand these days. The Greece bailout of $146BILLION was 2.5 times larger than initial estimates and some pundits believe that still won't be enough. Next in line for handouts are Spain and Portugal. Rumors that Spain may need as much $300BILLION in hand outs sent the stock and currency markets into a tailspin on Tuesday.
Amazing how well timed rumors can move the markets at certain times. I wonder which hedge funds circulated the rumors. It sure smells like a Soros type of manuever after he is aggressively short. Spanish leaders vehemently denied the rumors, stating that they were in better shape than most EuroLand countries. Well, what else would you expect a politician to say? Obviously, market traders did not share that confidence and it makes you wonder how bad things really are over there.
When viewed from the eyes of our congressional big spenders $150 Billion is chump change, but it's a big chunk for Germany to handle as they appear to be the only solvent entity on that side of the pond able to prop things up. Germany has become the 'Go To' country when begging for handouts in EuroLand but German voters may change things shortly. If Germany goes along with funding the yield on Bunds could start shooting up rather dramatically over the next 90 days.
France is in too deep to help, as always. The French are big talkers but they never seem to do much more than talk. Britain is overleveraged in Ireland and just holding their breath that the dominoes don't start falling. In order to get the funding in place for Greece, Mr. Trichet sanctioned the violation of certain covenants in the documents that formed EuroLand. In short, he changed the rules to suit the situation. Mr. Trichet has lost all credibility as a prudent leader in Europe but his actions qualify him for a post in our congress as all self dealing big spenders are welcomed in Washington.
The EuroLand crisis is similar to the oil spill in the gulf. It's currently spewing out 5,000 BPD. But scientists are worried that it could spew out as much as 60,000 BPD. If that happens there will be oil on the beach from Florida to Maine. If Italy, Ireland and Spain go down next, we'll feel the shock and awe over here.
Prices on Euro Currency futures cracked through a key support level at 1.300 on Tuesday. This was the level that was first penetrated on the upside back in 2004. The break out above 1.300 launched a huge rally up to 1.59 after a base of buying support developed in the 1.23-1.25 area.
As you can see, the 1.30 level was pierced rather dramatically back in financial sector blowout in October 2008. The market eventually double bottomed in the 1.24 area and went on to rally all the way back up to the 1.51 area. The question now, on everybody's mind is will the buyers step in again if the Euro futures hit the 1.24 level. Riots in Greece and rumors that Spain, Portugal and Italy will soon be begging for bail out funds are not exactly confidence boosters for Euro bulls.
We got another nice stair step decline in the Euro currency futures on Tuesday. Newer customers ask about the term 'stair step' in a declining market. In a downtrend the market makes a series of lower lows and lower highs. Our indicator KPPIVOT2 amplifies those steps by adjusting automatically in real time as each newer inflection point is established. Study the Support and Resistance lines on the chart below.
Our Support and Resistance lines automatically adjust when KPa900 crosses KPAUTOSTOP and the candlesticks change color from RED to BLUE or viceversa. In other words, the SUPPORT and RESISTANCE lines adjust whenever a new cycle commences. Let's take a close up shot of the Euro Currency Futures chart.
When a blue candlestick first prints the support line goes horizontal off the lowest red candlestick and PL prints. That tells you the selling cycle is officially over and a short term buying cycle has started. When the candlesticks turn red again, the resistance line moves down and goes horizontal off the highest blue bar and LPH (Lower Pivot High) prints on your chart. That tells you the buying cycle is over and a new selling cycle is in motion.
IN A DOWNTREND YOU ARE LOOKING FOR ENTRY POINTS TO GO SHORT. When the candlesticks turn red and LPH prints ...YOU GO SHORT!
This is not rocket science and the PIVOT2 indicator makes the set ups rather obvious.
If you would like to attend our free training sessions and take a two week free trial of Kwik*POP visit our web site at www.kwikpop.com or call us at 877-232-9595
Regards,
WDH
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