ES/FX

We still aren't getting any smoking guns, we are seeing some deterioration in both the ES and FX markets, but a lot happens overnight as you'll see and with the UK credit markets opening in just over 3 hours, a lot can change overnight.

 This is Sunday night/early Monday morning when ES recovered the gap around the 1361+ level, you can see most of the action came after the European open at the red arrow.

 As for tonight, we are approaching the ES gap (now support) in a slow drift, 3C is leading negative, but this is a very short term indication so I wouldn't read too much in to it.

 CONTEXT shows ES remains overvalued, the model is much closer to the gap level, but they are moving pretty much in sync, I think this has a lot to do with currency arbitrage.

Since the 4 p.m. close, the Euro has lost more ground and $1.30 is the key level. Looking at several different currency pairs the theme seems to be the $USD is strong and almost every pair against it is dropping, not just the Euro.

Looking back, not only was the French elections and especially the Greek elections a huge deal and in Greece's case, a big surprise, but I find it very scary that the ND party had 3 days to form a coalition government and gave up before the first day had even passed. It's now up to the anti-Troika group, if the ND gave up so quickly when they really only needed to gain a couple of seats, the anti-austerity movement in Greece must be overwhelming. The only road block to them forming a successful coalition is the fact there are so many smaller parties, many very different from each other, but they are united in their anti-Trokia sentiment. Can they overcome their differences? I suspect we'll have some idea tomorrow. If they do, the entire face of the EU concept and firewall will drop in to the ocean like Pompey, faith in the EU to resolve their problems will drop to zero and we will see the largest crisis in the EU yet and ironically it seems to  all be finishing right where it started with a small country that is almost meaningless to the EU in it's size and economic capacity, yet just like the few votes short, it really is the little things that make a big difference.

I haven't even come to terms with the number of ways this will effect the EU so I can't do it justice, but take my word for it, this is the Lehman times 10,000 event of this entire crisis and connecting all of the spiderwebs that criss-cross the entire world is something I think even the best research department would struggle to map out. In other words, this is a BIG DEAL and to think just several months ago the EU was totally out of the headlines, that may have been my best prediction this year, "Watch out for the EU crisis to come roaring back to center stage" and only a few weeks later it did. However now we are in the reality stage of the former theoretical worse case scenarios and not surprisingly, even those lacked imagination compared to reality.

I have one more prediction regarding Europe, in the next year or two it will have its own "European Spring", with seven political leaders and parties kicked out of power, with all of the forward looking planning and everything that has been done in danger of being washed away, with the huge gaping holes in Bank Assets and government debts along with harsh austerity measures that kill growth not promote it and finally with a multitude of countries seeing youth unemployment above the 50% mark, there will be an entire cultural shift, a lost generation and with all those youths with nothing better to do than watch their families laid off from jobs they've held for 20 years with promises of pensions reneged on, watch first for borders to be closed as those countries that still have some jobs left try to keep out citizens from other countries looking to cross borders in search of work. And all of the youth with no money and nothing to keep them occupied only need 1 charismatic fanatical leader to put their despair in to fiery words and speeches. I believe we will see once friendly neighbors turn to ultra-nationalism and most of it will be directed at Germany and the northern European countries, France may have just escaped their wrath in a knick of time with Hollande being elected, the French will likely align with the PIIGS and what will come of this will be much worse then the Athens riot cams. We have all the ingredients in place for another War on the continent of Europe.

I know this isn't really financial or economic related, although like many wars of the past, they can trace their roots to Finance and economies. The disdain is clearly palpable not only in Greece, which has every right, but now France. How long before Spain's pleas for help are rejected, Portugal follows in the Greek footsteps again, the eastern European countries are thrust back in to a poverty they haven't seen since the cold war? I don't think it will be long at all. I pray that this doesn't come to pass, but I think any history buff would agree, the powder keg is there and the fuse is growing shorted by the week.