Overnight / In to the Open

Yesterday's Euro weakness as we now know, is directly attributable to the FORMER Prime Minister of Greece, Papademos in which as mentioned last night he said that Greece has made preparations in case of a Euro exit. As pointed out Sunday, this week we would see many rumors, rumors of rumors and denials.

First with the situation in Greece what prudent person wouldn't make contingency plans for a possible Euro exit? That's just common sense, but the market is hyper-sensitive to anything Greek related.

What you may not know or remember is that the former PM, Papademos is in fact Goldman Sachs Alumni, that's right, just like the head of the ECB, Mario Draghi and Italy's Monti, they all have long standing relationships with Greece.

As another reminder  yesterday I posted, "Goldman Sachs is Bearish" with the following comments,


"Goldman Sachs released a "FREE" report in which they are bearish on stocks, whenever GS or any other Wall Street firm is giving away free advice, you can pretty much count on them doing the exact opposite. Last time this particular analyst came out with a recommendation it was a buy on March 21st-of course what was Goldman doing, dumping everything."


So I find it a little more than coincidental that the same day GS issues their "bearish" stance (recall last time they were bullish on March 21st, 2012 they were selling everything) that a FORMER PM of Greece (not exactly the most relevant person in Greece anymore) who happens to have a long standing relationship with GS comes out with "NEWS" that is little more than common sense, but it did I said on Sunday-moved price.


Now for the counter-part to any good rumor, THE DENIAL. That's right, overnight on CNBC Papademos denied this!!!


The effect? Lower prices for GS to buy in to, unless you really believe GS is being honest and giving you FREE information when they routinely trade against their own clients!!!


The irony and timing of it all is just too surreal, BUT that's the market we have. Now we've seen some inner working in FB and of course the propaganda side of market manipulation via Papademos and Goldman.


The market overnight stayed pretty much transfixed on the Papademos comments, which again whether he said them/meant them or not, it had the intended effect as GS isn't going to chase strength any more than we would.


As a result the new PSI Greek bonds, (GGB2) which were issued in the PSI debt restructuring "haircut" are now trading at new lows, as well as another issue regarding a PSI hold out with the non-Greek law bonds who may be demanding or bringing legal action against Greece to recover full par on $500k Swiss Francs with immediate payment and/or may be moving to pressure Greece to post collateral. The issue is not the $500k SF payment, the issue is all of the outstanding International law bond holdouts and how they are pressuring Greece to make their investments whole, whereas the PSI participants who swapped out their bonds and took the haircut are now at nearly 90% losses.

The new bonds are trading at a 50% loss to the value when issued at the conclusion of the PSI swap in March.




Overnight retail data out of the UK was weaker than expected (at this point to be "weaker than expected" either shows a naivety toward the EU situation or things are really much worse than what is already considered to be unthinkably horrible).


In addition the BoE's (Bank of England) minutes from their last policy meeting were released showing an 8:1 vote to keep QE on the back-burner, not a market positive for a market that is addicted to QE/money printing.


Also according to YahooFinance,


"LONDON (ShareCast) - Spanish President Mariano Rajoy will ask for assistance from the European Central Bank (ECB), Spanish daily El Mundo reports citing a conversation between Rajoy and Socialist leader Alfredo Perez Rubalcaba yesterday. Rajoy will be traveling to Brussels today to meet with European leaders after meeting with French President Francois Hollande in Paris. He is expected to ask the ECB to buy Spanish sovereign debt to help calm the urgent liquidity problems. The monetary authority has not intervened in the secondary debt markets for the last ten weeks as it has resisted calls for a more active role. The leaders will continue to debate between austerity and growth. Rajoy is expected to side with German Chancellor Angela Merkel's stance that there cannot be growth without austerity first. MG"


So now we have additional worries over Spain as they seem to be entering the first stages of the bailout process, at least that's how market sentiment will read this given the concerns over a Spanish default and their banking sector.




In early Asian Trade, the BoJ (Bank of Japan) surprised some by not changing rates and not engaging in further asset purchases, which led to Yen strength across the board (Yen strength is typically associated with market weakness because of the carry trade). Here's the USD/JPY chart from overnight...

Here you see the Dollar drop and YEN rise after the BOJ decision in early Asian trade, since then the Yen has flattened out.


There will also be an informal EU Finance meeting in Brussels at 5 pm London time and a tentatively scheduled Press conference at 8 pm so we should see the results of that later this afternoon.




Thus far in the US, we have New Home Sales just out...


Released On 5/23/2012 10:00:00 AM For Apr, 2012

	Prior	Consensus	Consensus Range	Actual
New Home Sales - Level - SAAR	328 K	335 K	325 K to 355 K	343 K

We have a beat in New Home Sales, it did little for the market as it's fighting Euro weakness.




Here's the Euro and ES overnight...

 Europe opens at the Green arrow, the Euro finds support at the downtrend line at the yellow arrow.

 This shows Monday's close, the overnight downside, Tuesday's open and Tuesday's close and the Euro finding support at the downtrend line.

 Support around 4:30 a.m. EDT

The longer view.


By far, the biggest or most interesting event is the GS/Papademos connection, it's time to pay attention as I believe GS is engaging in their typical subterfuge.


Right now we are seeing a sell-off in the Euro since the open...

This appears to be a technical move, I have a strong feeling GS has something to do with it.