All the euphoria of last Friday vanished in thin air with the curveball thrown by G-Pap. For the last 30 years Greeks have held the EU hostage with their brinkmanship and guilt manipulation. After the voluntary ( ha ha ha) 50% haircut agreed by the European banks, EU should now set aside another Euro 200 billion for loss write off and show the door to Greece. If that requires change in the treaty, do it. That way others in the PIIGS club will not ask for any further concession or write off. But that requires nerves of steel and team Merkozy do not have that. They are just buying time for their banks. In the mean time, Greeks have got hold of Europe by their S&C and blackmailing them, milking them for whatever it is worth. Greece will collect another few hundreds of billions of Euros and then default. It is their sense of entitlement that is driving the whole Euro mess. I do not see any solution for the debt problem of Europe and Italy will soon follow Greece to give the fingers to Germany and France. Already the Italian 10 year bond yields are well over 6% and rising. Frantic efforts are on to reduce the gap between German bunds yield and Italian yield and they are even changing the margin requirement rules. ECB has now stepped in to buy the Italian Bonds to control the situation.
On the other side of the pond, things are as messy as ever. Channel stuffing by GM continues. GM books its car sales as soon as the inventories are shipped to the dealers. And dealers’ inventory is up by 15%. How long it can continue? This is not well for jobs or GDP.
I think we shall see a green day in the stock markets after two successive distribution days. NYMO is no longer at extreme high and now hear the 200 DMA. So we might see some buying tomorrow but I do not think the selling is over yet. We might see some more selling before we can have any tradable bottom. I also think we are heading for a multi week rally and would like to take this opportunity to go long. But I am still waiting on the sideline and will take the call soon. For now, the best course of action is not to take any action.