With the Merkel on vacation during the last 3 market days in which Draghi was talking the stock markets higher, there was no seeming response from Germany other than from their central bank which was against the Draghi proposals to re-activate the SMP Spanish bond buying (which has been out of the market for 4-5 months now). The WSJ on Friday concluded that with the market pricing in Draghi's comments, if there wasn't action this week, get ready for a sell-off.
This weekend, Germany's #2 most influential individual in the markets, the Finance Minister Wolfgang Schauble finally spoke and it doesn't sound very supportive of Draghi's proposals that ramped the market higher.
From Germany's Spiegel:
"For days, it is rumored that the ECB will buy Spanish government bonds in a big way. Now Finance Minister Wolfgang Schaeuble has rejected such reports - there was "no truth"
For days, it is speculated that the European Central Bank (ECB) is planning, together with the bailout fund EFSF Spanish government bond buy - so come back to Spain to cheaper capital.
Federal Finance Minister Wolfgang Schäuble (CDU) has now dismissed the reports in an interview with the newspaper "Welt am Sonntag".
"No, at this speculation is not true," Schäuble said the newspaper.
In addition, the Dow Jones Newswire added:
Speculations that Spain might apply for additional aid from the rescue fund are unfounded, Mr. Schaeuble said, according to pre-released excerpts of an interview to be published Sunday in Germany's Welt am Sonntag. Spain's "high interest rates are painful and cause a lot of concern, but it isn't the end of the world when a few percent more have to be payed at some auctions," Schaeuble said according to the newspaper, adding "Spain's financing needs aren't that huge in the short term."
These weren't the only headlines out of Germany this weekend...
The Deputy leader of Merkel's CDU party said, "Greece cannot be saved, that is simple mathematics,"
Perhaps we are getting an inside glimpse of what Germany is thinking and planning with regard to the future of the Euro-zone.
Just to prove one hand doesn't know what the other is doing in the EU, or something far worse...
Jean Claude Junker, the head of the Euro-Group, who may be best remembered for his 2011 comment,
“When it becomes serious, you have to lie."
Has now weighed in on the Draghi confusion and he may just feel that now is a "serious" time.
Juncker:
"No time to lose": The chairman of the €-group sees a crucial point of the debt crisis has arrived. Jean-Claude Juncker supports plans by ECB chief Draghi for the purchase of government bonds - and Germany are partly to blame for the crisis. Berlin treats the euro area "as a branch." Also called "chatter on the withdrawal of Greece" is not helpful.
Juncker confirmed that the euro countries are preparing together with the bailout fund EFSF and the European Central Bank to buy government bonds if necessary clip euro countries. Because there is no doubt, he said. "It is still necessary to decide exactly what we will do and when." This depended "on the developments of the next few days and from reacting as fast as we need."
So what exactly is going on?
The euro zone is at a decisive point and leaders will work with the European Central Bank (ECB) to demonstrate their commitment to the stability of the single currency, Eurogroup head Jean-Claude Juncker said in interviews with European newspapers.
Juncker told Germany's Sueddeutsche Zeitung and France's Le Figaro in reports made available on Sunday that leaders would decide in the next few days what measures to take to tackle Spanish bond yields which last week touched euro-era highs. They had "no time to lose," he said.
Asked whether it was true that France wanted the bailout fund to buy government bonds, under an agreement made by euro zone leaders at their summit in June, but that Germany was resisting, Juncker answered:
"I have no doubt that we will implement the agreements of the last summit. We still need to decide what we will do when. That depends on the developments of the next days."
The European bailout fund, the European Financial Stability Fund (EFSF), will work together with the ECB without affecting its independence, he said.
"We will work in close agreement with the ECB, and we will, as Mario Draghi said, see results. I don't want to drive expectations, but I must say, we have reached a decisive phase."
Draghi said on Thursday he would do whatever was necessary to protect the euro zone from collapse, prompting expectations of a new bond-buying program.
"The euro countries have reached a point where we have to use all means possible to show that we are determined to protect the stability of the euro zone... nobody should doubt the will of those involved, to prove our determination," Juncker said"
So Juncker has come out the very next day and contradicted Germany's Schauble, who to believe? Even if intensions are on Juncker's side (and his credibility is not the best as Spiegel caught him and got him to admit to an outright lie regarding an EU conferences existence and he himself has said "when it becomes serious, you have to lie"), the EU has shown time and time again, intentions and plans are one thing, execution is something altogether different. Obviously Spain entering a sovereign default is about as serious as t gets right now, so is Juncker simply sticking to his core belief and lying? In any case, the stage seems to be set for rumor/denial/counter rumor/ etc or what I call, the "European Sewing Circle" which is certainly good for amazing volatility and instantaneous market swings.
The difficulty right now is comes down to this, "Does Smart Money even have a clue?", as the Europeans don't seem to, I have doubts whether smart money can possibly know, that doesn't mean they don't have the power to push the market around, but they may not want to push too hard in one particular direction with this new uncertainty unfolding. If there's one thing the market hates, it's uncertainty; as the saying goes, "When the missiles fly, it's time to buy", not because the market loves war, but the start of war removes the uncertainty leading up to war.
So what does the market think?
It is exceptionally early to make any judgements as important markets are not yet open, but from what has opened, here's what we have...
While our trend table was short term down with some up move noise, our longer sub-intermediate trend after the short term trend was for a move significantly higher. Finally the expectation was for the larger primary bear trend to re-emerge.
I saw a lot of strange 3C activity on Friday, I assumed that it was heavy HFT trading activity, now I'm not so sure. I do look forward to some solid signals this week so we may get trades in line and make some nice trades this week.
