PURE RISK

The Greek debt deal is done or is it? It is not. 

I pointed out several weeks ago, that in the eyes of the market, while there may be some relief rally, in the end Greece will likely have the same deal it had before the negotiations started, which means nothing changed.

After campaign promises by Syriza and PM Tsipras to End cooperation with the Troika, to roll back austerity measures, to hire government workers to ease Greek unemployment and negotiate a new deal that gives Greeks their dignity back, even dismantle the Troika itself and vowed NOT to compromise on these points and that doing so would be like driving the nail in the coffin of Greece, the beginning of the end was very different.

Today ended with what is essentially a 3rd memorandum commitment, in other words, Tsipras and Varourakis ended up with a worse, more humiliating deal than what they walked in to when elected.

After Germany refused every Greek submission, today the very best that the Greek delegation could obtain in the deal was two new phrases replacing bail out and Trookia, that's it.

What it lost?

Euro zone officials said Greece's track record and the combative behavior of its new leaders had undermined their confidence in whether Athens would deliver what it agrees to in talks.

 That drove ministers to make Greece hand over custody of nearly 11 billion euros in aid earmarked for stabilizing its banks to the euro zone's rescue fund.  Dijsselbloem said."We wanted to make sure that the ... money for Greek bank recapitalization is for that purpose, not for recapitalization of the government,"

Talk about humiliation, a worse deal and in addition, from here until Monday, there's no upside, only pure risk.

Because of the Greek uprising over the bailout, Germany is insisting that Greece come up with a list of additional reforms Greece will take from now until the money is paid back, the end of the program and they only have until Monday to do it. 

What you may have not caught is if the Finance Minister's of the EU are not satisfied with the list of new reforms, additional austerity if you will, due by Monday... the deal is dead.

Greek Finance Minister, Varoufakis tried to turn this around in saying that if the Finance Ministers don't agree with the Greek reforms to be submitted, the deal blows up as if Greece were in control, quite the opposite, it's more like Greece is being humiliated in to writing on the blackboard 1000 times, I will never question the Troika again and is being given a writing assignment of new reforms their government will stick to and according to Germany in a leaked memo of what is needed for the deal Thursday:

1) a CLEAR and CREDIBLE request by the Greeks to continue on with the current program , 2) They will agree with the lenders as to any changes the lenders make 3) They will commit to fulfill the terms and conclude the program.

Germany made Greece cry "Uncle" on every single point. Even the 6 month bailout extension was reduced to 4 months.

The list of reforms that Germany expects by Monday were said to have to be "Significant improvements" before extending the bailout. As the Greek party Paosk accused Syriza of not negotiating out of the bailout, but agreeing to a 3rd memorandum, the direct opposite of the stated intensions, it seems Paosk was right.

These "significant reforms" are what Greece must turn over to the Eurogroup Finance Ministers by Monday if they want to even have a shot at keeping the deal they said they'd overturn in "An end of cooperation with the Troika".

All of the will not compromise, will not succumb to blackmail talk was in the end nothing more than talk. 

In a parting shot Schaeuble said they, "CERTAINLY WILL HAVE A DIFFICULT TIME TO EXPLAIN THE DEAL TO THEIR VOTERS'".

The 3% surplus the Trokia is demanding, cuts out Syriza's planned 1.5% surplus so they could re-hire government workers. This is non negotiable. 

Greece lost, pure and simple and lost big and they still have a humiliating walk of shame to produce by Monday which may or may not be accepted by Germany, if it is not, according to Schaeuble, THERE WILL BE NO PAYOUT.

If it is accepted, then each country in the Eurogroup will have to ratify the deal through their respective parliaments so we are indeed a long way from this being over.

If I were Russia or China, I might be tempted to throw the Greeks a low-ball offer over the weekend and if the Greeks had been smart, they would have taken the printing press used to print $10 euro bills for the ECB and printed a stack of Drachmas.

The point simply is, THERE IS NO UPSIDE BETWEEN NOW AND MONDAY/NEXT WEEK, ONLY PURE RISK FOR A VERY BRUISED COLLECTIVE GREEK EGO.

Greek Waste of Time-Truly Embarrassing

After an election which harnessed the idea that the Greek people gave Syriza a mandate to regain Greek dignity stolen by the Troika (as Syriza said after the elections, "This is what happens when you strip a nation of its dignity"); after an amazing amount of hyperbole that actually seemed as if this young administration (likely the problem along with a Finance Minister who is an academic rather than real world just like Mister B. Bernanke) was actually brave or dumb enough to go through with some of the very stern threats they made, it's amazing to read the press release. I suspect Tsipras and Varifokous have some "Splaining" to do to the rest of the Syria political party and the Greek nation as a whole.

If the Germans had a lack of respect for the Greeks before, it only doubled as this entire event will be viewed as much ado over two phrases, essentially a pain in that Schauble had to get out of bed ad deal with these noisy upstarts, but that's about it. If it did anything for Greek pride, it was shot down before the ink on the press statement even dried. German Finance Minister Schauble had this to say just after the concluded deal...

1) 'THE GREEKS CERTAINLY WILL HAVE A DIFFICULT TIME TO EXPLAIN THE DEAL TO THEIR VOTERS'

2)  AS LONG AS THE PROGRAMME FOR GREECE ISN'T SUCCESSFULLY CONCLUDED THERE WILL BE NO PAYOUT


If you are wondering whether that sounded like the German Finance Minister saying not only did the Greeks get NOTHING they were after, but YES, he mocked them in saying that they'd have a tough time explaining their hypocrisy and utter failure for Greek voters who voted for change! 

While it may not be in good taste (I guess we have to understand that Schauble feels he wasted a lot of time playing with children), what he said was right on the nose.

It's no wonder parts of the market didn't exhibit risk, NOTHING HAPPENED!

Listen to some of this from the press statement...

"Eurogroup statement on Greece

The Eurogroup reiterates its appreciation for the remarkable adjustment efforts undertaken by Greece and the Greek people over the last years. During the last few weeks, we have, together with the institutions, engaged in an intensive and constructive dialogue with the new Greek authorities and reached common ground today."

"Institutions" replaces "Troika", the entity that Syriza said they will not deal with anymore, all talks are off the table and they will DISMANTLE the Troika, they succeeded in having the nomenclature changed. It goes on...

"The Eurogroup notes, in the framework of the existing arrangement, the request from the Greek authorities for an extension of the Master Financial Assistance Facility Agreement (MFFA), which is underpinned by a set of commitments. The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement"

"Existing arrangement" replaces the word, "Bailout", but for ALL intents and purposes, the Bailout that the Greeks said they did not want and was not even on the table for discussion, IS EXACTLY WHAT THEY ARE STUCK WITH!

"Set of commitments" is otherwise known as "austerity" and the changes to labor and other austerity measures that Greece was suppose to revoke this week, MUST REMAIN in PLACE!

The "successful completion on the basis of the conditions in the current arrangement" means NOTHING has changed at all, NOTHING! The entire Troika bailout program with all austerity measures is still 100% in place, they accomplished nothing but o change some vocabulary.

It continues...

"The Greek authorities will present a first list of reform measures, based on the current arrangement, by the end of Monday February 23. The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. This list will be further specified and then agreed with the institutions by the end of April. "

This means the Syriza government will confirm that they will stick to the originally agreed upon austerity measures that they campaigned to do away with completely. THERE IS NO DEAL IF THEY LEAVE ANYTHING OUT OR TRY TO CHANGE ANY AUSTERITY MEASURES THAT ARE PART OF THE "CURRENT ARRANGEMENT"-BAILOUT! In other words, we want it in writing and convincing that you will live up top the original deal which is exactly what Germany said they would need in addition to 2 other things for any deal in a leaked memo last night.

I suppose "further specified" means additional Troika demands to be met!

The bottom line that says Greece caved in in every way possible other than vocabulary changes is, 

"The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely."

Here's the letter in full, it's actually painful to read when you hear how badly these guys were spanked...

Eurogroup statement on Greece

The Eurogroup reiterates its appreciation for the remarkable adjustment efforts undertaken by Greece and the Greek people over the last years. During the last few weeks, we have, together with the institutions, engaged in an intensive and constructive dialogue with the new Greek authorities and reached common ground today.

The Eurogroup notes, in the framework of the existing arrangement, the request from the Greek authorities for an extension of the Master Financial Assistance Facility Agreement (MFFA), which is underpinned by a set of commitments. The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement, making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions. This extension would also bridge the time for discussions on a possible follow-up arrangement between the Eurogroup, the institutions and Greece.

The Greek authorities will present a first list of reform measures, based on the current arrangement, by the end of Monday February 23. The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. This list will be further specified and then agreed with the institutions by the end of April. 

Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of thecurrent EFSF programme and the transfer of the 2014 SMP profits. Both are again subject to approval by the Eurogroup.  

In view of the assessment of the institutions the Eurogroup agrees that the funds, so far available in the HFSF buffer, should be held by the EFSF, free of third party rights for the duration of the MFFA extension. The funds continue to be available for the duration of the MFFA extension and can only be used for bank recapitalisation and resolution costs. They will only be released on request by the ECB/SSM.

In this light, we welcome the commitment by the Greek authorities to work in close agreement with European and international institutions and partners. Against this background we recall the independence of the European Central Bank. We also agreed that the IMF would continue to play its role.

The Greek authorities have expressed their strong commitment to a broader and deeper structural reform process aimed at durably improving growth and employment prospects, ensuring stability and resilience of the financial sector and enhancing social fairness. The authorities commit to implementing long overdue reforms to tackle corruption and tax evasion, and improving the efficiency of the public sector. In this context, the Greek authorities undertake to make best use of the continued provision of technical assistance.  

The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely.

The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.

In light of these commitments, we welcome that in a number of areas the Greek policy priorities can contribute to a strengthening and better implementation of the current arrangement. The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.  

On the basis of the request, the commitments by the Greek authorities, the advice of the institutions, and today's agreement, we will launch the national procedures with a view to reaching a final decision on the extension of the current EFSF Master Financial Assistance Facility Agreement for up to four months by the EFSF Board of Directors. We also invite the institutions and the Greek authorities to resume immediately the work that would allow the successful conclusion of the review.

We remain committed to provide adequate support to Greece until it has regained full market access as long as it honours its commitments within the agreed framework"

Market Update/Week Ahead

There's still a very knee jerk look and lack of risk on in the group/s you'd expect it most. Charts are very fluid, but there are a few trends since this Greek deal in which it "appears" from a cursory glance at the proposal, that Greece essentially caved in on just about everything and a few bones were thrown their way such as Troika being replaced with "institutions", I don't think this plays well back at home for Syriza. As far as I can tell, other than changing some language, we have essentially the same Greek situation we had before Syriza took control, being they control parliament and are a group of loosely woven idealists, Tsipras may have some trouble with parliament who believed in what they were doing, as unrealistic as it may have been.

We'll see about that in the next hours and days.


I don't think this changes anything about where we are in the cycle and our expectations for a downside pivot in to next week.

Right now, I'm almost expecting a large volume surge, a kind of  exhaustion event.

 Earlier today our custom SPX:RUT Ratio was in line with the SPX movements, but in the afternoon it diverges substantially, this is a reflection of the lack of "Risk on" in the IWM which should lead risk vs the SPX.

This shows HY Credit and the typical signals we look for such as the former top and a leading divegrence with the same now, but I'm using this as an example, although it is material, I want to show the intraday chart.

 This is the cycle which is relevant too as HY Credit diverges with the SPX, a leading signal.

 However it's the intraday chart as HY credit as seen in the other charts, is a risk asset and should move with risk assets, although it tends to lead, no such movement today vs the SPX.

Although commodities are getting what we expected such as oil and gold, they too which have been behaving as a risk asset are not in a risk on mode here today or in broader terms.

 Interestingly, TLT which yesterday we were looking for a bottom in, did pullback, but in to a positive divegrence keeping it's bottom intact.

 And the SPY intraday

QQQ

And IWM with longer charts since the Greek announcement showing worse signals.

IWM

XLF rotated in today as we were expecting, whether it was Greece alone or it would have happened regardless.

And FAZ accumulating the lows.

Webcast

The parabolic move has more or less halted as the webcast for the Eurogroup, which is confirming a 4 month deal, with some strange open ends that Greece has to resolve by Monday. As always, the devil is in the details.

However, other than the normal parabolic move which is understandable on a knee jerk reaction, being suspect, there's just something very strange about the way risk assets are behaving or not behaving.

These charts are very fluid obviously with the press conference, but as of the capture just before starting this post...

 Q's not confirming on the fastest intraday chart, 1 min which should have been near automatic.

The IWM at the time of capture not only not confirming, but not performing, risk assets should see this as either risk on or risk off.

 SPY which started to confirm, then gave it up.

And XLF/Financials which we expected rotation to today, a pullback in FAZ, also not confirming, but making the expected move.

I'm jumping over to the Leading Indicators layout as well as trying to stay on top of the press conference.  Something just doesn't smell right in risk asset world.

Trade Idea: Short Term Spec Puts...QQQ

Looking at not only the parabolic move which I never trust, but the volume, $TICK and relative performance between Q's and IWM, I'm going ahead with a short term, spec March 20th QQQ Put at $108. I may decide to increase it, but something definitely doesn't look right here, even if this is a quick scalp.

IWM/SRTY Update

Looking at the IWM/small caps, it looks like it is hanging on by a thread...

 IWM intraday

And the 3x leveraged inverse/short Russell 2000, SRTY looks to be confirming the IWM weak looking chart...

Market Update

You know, I remember now the initial or orignal Greek and other bailouts, they weren't that much different than this one with wild stories being floated and shot down.

Since the last Greek drama update, the Greek Finance Minister takes issue with the Bild story that they sent the wrong letter, who knows, BILD is a German paper and I suppose in Germany there's probably a stereotype of the Greeks being bumbling fools, but it didn't stop there.

Around an hour ago at 12:35 there was a new story floated, that the Eurogroup reached an accord. Then at 12:42 an "official" Greek Spokesman said he had no knowledge of a deal having been reached. Then it was "common text" was being agreed on.

The latest is that a 4 month rather than 6 month "DRAFT" has been agreed to with numerous items still to be negotiated, which is well, as it sounds, a draft.

The EUR/USD probably best tells the story...

The start of all of these shenanigans which still have yet to be officially confirmed, started at the white arrow. To my eye, it looks like the initial enthusiasm in the FX pair has lost some steam and there appears to be a negative divergence in place, I didn't want to draw the arrow across the entire (important) part of price action, but you can probably see it.

As for the averages, they look a bit mixed intraday, with an overall negative tone,  however our post yesterday, Leveraged ETFs / FAZ, looking for a pullback in FAZ is now exactly on track and interesting as well.

 SPY intraday is lagging a bit...

XLF did make the move that it didn't loo like it would make earlier today, the one we expected today from yesterday's post linked above providing a pullback in FAZ.

Speaking of FAZ, here's the intraday chart and initial accumulation in to the pullback, this set-up first posted yesterday for today, looks to be on track early in to the pullback.

The Q's don't look good at all here, I don't even have to draw it and ...

Nor does the IWM

HYG is also seeing an intraday negative.

I don't know that Op-ex and the typical max-pain pin and the change in the market at 2 pm will hold any meaning today with everything else, but we'll find out soon enough.

I'll post additional updates including FAZ if and when it looks to be in a buy position.

Leading Indicator TLT Follow Up / Market Update

Apparently all of the intraday action, the move down and then back toward the range which would "seem" like an option expiration pin, may  not be that at all.

Greece apparently sent the WRONG letter to the Euro-group Emergency Finance Minister meeting, the one that Germany blew out of the water. Apparently the "new one" has made significant concessions, although I still can't see how they can agree to German demands. It has been called, "Going the extra 10 miles" by Greece. Apparently, they just couldn't get the CORRECT letter to the Emergency meeting, either a total BS story or gross incompetence, I'm sure the Fin-mins are all very pleased to wait for Greece to send the correct letter and I can only imagine the whispers and chuckles if indeed this is the case and not a Greek Bank run road-block.

Looking at Leading Indicators, which I normally don't like to do too early as the closing indications are the best, I don't see too much too different from yesterday. Here are a few Leading Indicators of interest...

 Commodities (brown) vs the SPX continue to diverge as they once again appear to be an effective Leading Indicator after a several year hiatus.


HY Credit continues to decline vs the SPX, a notable signal.

And perhaps the most expected of all after yesterday's TLT 20+ Year Bond Fund / Leading Indicator...  post.

As expected, TLT(20+ year bond fund) as well as 30 year Treasury futures both looked like they'd head higher, not just near term, but a swing/pivot. The evidence of that is in the 30 year yields above (red) vs the SPX which are lower as we said they'd be yesterday on a TLT move higher. This pressures the market lower as yields tend to act like a magnet for equity prices (and move opposite bond prices).

You might call a rotation in to bonds, a "Flight to safety trade".

From yesterday's post...

"Note the dates 1/29-2/2, TLT was topping, negative and then rolled over as the market was basing there and then bouncing. The current leading positive divergence in TLT suggests it's ready for another turn, this time up which means long term yields should move down pressuring the broad market as well...."

Here's the correlation between the SPX and TLT

 60 min TLT (red) vs SPX (green), it's nearly inverse.

On a 15 min chart, the market's base matches perfectly with TLT's top and downtrend, now there's a new TLT base.

Here's the short term chart, leading positive at the close and picked up where it left off with a gap up this morning sending yields lower and pressuring the market.

While I included a lot of charts yesterday, I added these like this 2 min positive because it keeps adding to the positive divegrence which is substantial.

TBT is the 2x leveraged inverse of TLT, this 5 min chart's current negative divergence is confirmation of the TLT base/positive divergences.

 This 10 min TLT is leading positive at a new high.

As is this 60 min chart.

As I said yesterday, I thought TLT was going to head higher and it has started to.

I think you can see the inverse relationship TLT has with the market implying very strongly that TLT is at a bottom and heading up and the market is at a top and heading down.

I'll continue to update additional assets as well as keep an eye on Greece, but with everything we saw this week culminating yesterday and now LT doing as expected, it's VERY difficult to believe we are not at the market's downside pivot now.

AAPL's Kiss of Death

Some of you longer term members may remember the post every so often of Goldman Sachs "Free" trade recommendation and the results of such. The first red flag in any of this is Goldman Sachs who, well who is said to trade against their own clients. Secondly I could never accept that these companies would ever give out beneficial information to you for free, they are the furthest thing from a charity, but...

If you were already predisposed to being an AAPL long and fan of the company, then how might you take their release of their new AAPL target of $145 up from $130?

Just on a random search, lets look at some past Goldman calls of this nature.

Goldman Lesson and some Odds and Ends... October 16, 2013...

"with some free advice from Mr. Stoppler, which is an ironic name because the last 6 or 7 trade recommendations he's put out have been "Stop-plerred" out. "

Back then it was another free trade that made the "Stoppler" track record 7 of 8 trades stopped out. The short USD/JPY looked and ended like this...

Stopped out and this wasn't even a trade with more than a 2:1 risk/reward ratio. The question is, do you believe that GS was actually short USD/JPY as they had recommended? Whether GS is smart money or not is not the point, the point is which side of the trade do you think they were on?

I could keep going, I believe by the end of 2013 it was 9 consecutive failed "Free" trade ideas.

So now they're upping their target on AAPL, the question once again is what side of the trade do you think they are on?

We've had plenty of AAPL posts recently: AAPL Management, AAPL Update, Quick AAPL Update, etc.

While most of the long to intermediate charts haven't changed much, AAPL also has a similar look to QQQ's Igloo/Chimney and this is what the 3C charts in that area look like...

AAPL intraday 1 min.

No matter what Goldman thinks of AAPL, good or bad, the one thing they know is that without the hedge fund heard there to provide "Strong hand support" that doesn't waver according to 48 hour price movements like retail, it's darn hard to keep price up without that institutional sponsorship and you probably recall funds such as Appaloosa closing out their entire AAPL position in Q4 2014.

We'll keep an ongoing eye on AAPL, but...  Food for thought.

Early Update

This morning's price action is surprising considering the typical op-ex behavior, but not very surprising considering everything else that has developed including most recently some very ugly negative divergences in to yesterday's close. Last night's Daily Wrap concluded as follows:


"I think you can probably sense it through my tone, but I feel we are very close to a pivot and downside reversal in the market so i'll be looking at many more assets, like NFLX and AAPL mentioned today.

I'll check on futures in a bit and see if there's anything starting to standout there.

Tomorrow is a monthly options expiration so look for the max pain pin somewhere around today's close until at least 2 p.m., after that we should have some good data, but I suspect things are going to head south and very soon."


If you are a currency trader, this week has provided plenty of volatility...

 EUR/GBP

EUR/USD

As for Index futures, they have been rather flat overnight with some slight bumps to the upside on positive headlines, more "source" rumors, but you can see how the market has opened...

ES overnight and in to the open.

As I said yesterday, there were some deep negative divergences in to the close, not just in the averages, but in a lot of places including HYG.

 As to the Igloo with Chimney top pattern which is so effective as a timing indication, with the chimney almost always directly preceding a reversal, this looks to be one in the Q's.

While not as well formed, the IWM also shows signs of one.

The idea is that the rounding top may cause some longs to doubt their positions and take some off the table, the chimney or pop above the rounding top commits them, whether they already took some off the table and add it back seeing a break higher or whether it keeps them in before the building doubts cause them to take action. Then suddenly price tends to drop, locking longs in place in a bull trap. After that it's just human nature to not accept what's happened and rather to engage in a litany of cognitive biases such as, "well the market has been up for "X" days, this must just be a small correction, maybe I'll add here to my long" and that's how it starts.

There are a few trades I'm quite interested in, some we have already recently added to, some not yet. I want to take a quick look around and make sure that this looks like a high probability pivot as well as which assets are the best looking at this moment.

UNG Breakout

Finally something different to talk about other than the very predictable Euro/Greek crisis which is best summarized by this cartoon I saw earlier this morning via Germany's TAZ,

I'll try to get to the real crux of the issue and perhaps it will be easier to understand while meeting after meeting has failed to produce even a single press release of some progress, they can't even get a draft of that out!

So UNG has broken out this morning, up +5.33%.

I hope a lot of you were able to catch this one. After our earlier Feb 10th stop run, our last update this Wednesday (Feb 18th), UNG Follow Up, said:

" On a 60 min chart, the shakeout would be below the yellow trendline which is also where the 60 min chart leads positive, in other words it looks like shares shaken out were accumulated....

Very short term, the 3 min chart is positive at the lows and in line since with some local resistance, all in all the probabilities lay with the 60 min chart, thus UNG should be able to break above local resistance"

The late fall/early winter season started unseasonably warm, however since we have obviously seen unseasonably cold  waves. In Florida it was in the 20's, I can't remember the last winter in which we had more than a couple of days at 50 and usually around 70-80.

So far everything looks pretty darn good. There's not much to update on the longer term charts since Wednesday, but the very short term charts are at confirmation or close and I have a couple of trending stops/Trend Channel for you.

 Here are the head fake/stop run moves mentioned in the last several updates. The main one was below $14, which volume makes obvious, then after setting support with a hammer, $13.50 was the next stop hit. As I said in the last update, the 3C charts show all of this head fake move under $14 as having been accumulated or bought on the cheap. Today's breakout is from an ascending (bullish) triangle-like pattern, not textbook, but the psychology is the same.

 3min confirmation...

For now, trade management is the name of the gam so we'll get this move in a Trend Channel now.

 The tighter 60 min Channel has a current stop around $14.40, I prefer to view that as on a closing basis. This stop will continue to lock in additional gains every hour. Initially a 60 min 22-bar expo moving average is "close" to the Trend Channel, but it can't do what the TC can do for long.

The larger view is that of a daily stop, now at the $13.85 area, this may be best applied after UNG gets more momentum under its wings.

So far so good, and very glad to see the move.