Is the Greek Tragedy About to Erupt?

While US markets tease the bears near a possible top, the action is over in Europe. A Euro bond offering failed to complete in German Bunds, the first failure in over a year. Greek CDS spreads rose to record highs, and the Euro has dropped for the fifth consecutive day. German opposition intensifies to a bailout of Greece. Leaks indicate that the cost of the bailout may be more than twice as high as previously thought.  Shanky's technical analysis site has a good summary. 

And Portugal is next. Their CDS spreads surge to within 7 bps of a record.  The Big Picture puts this succcinctly:

The Greek 10 yr bond yield is rising another 40 bps to 8.25%, the highest since Oct ‘98, the 2 yr yield is up 35 bps to 7.65% and 5 yr cds is up 25 bps to 485 bps and is fast approaching the Ukraine. Portugal continues to get dragged into the mud as their 10 yr yield is up 17 bps to 4.79%, the highest since March ‘09 and 5 yr cds is up 20 bps to 220 bps.

The maco-economic speculation is that the Euro may be acting as that "barbarous relic" which caused serious problems in the early 1930s. Keynes thought that adherence to a gold standard had limited the ability of distressed countries to reflate their currency. Brad Delong (Keynesian professor at Berkeley) has a chart to capture this point, below. Question is whether keeping Greece on the Euro will prolong their travails vs letting them go back to the drachma and inflation. 

Comments

[trendlines]

Hi Yelnick,

Althought bearish on the longer-term, the medium-term bullish triangle scenario for Shanghai Composite is still intact. Here's why:

http://trendlines618.blogspot.com/2010/04/shanghai-composite-bullish-triangle.html

BTW, just noticed you referenced Trendlines in one of your posts. Thank you.

[KRG]

Dow Predator/Zendo :
Let us separate Neely, the man and the method. As I pointed out earlier, some staunch NeoWave fans were calling the market up for last few months even while Neely is coming to terms with his count.

Call it law of averages or anything.. This is what I like the most about the "Yelnick" theme i.e., every forecastor is eventually susceptible to "being hoist by own petard"

I do wish Neely had some humility though.. just so that one's own hubris does not become the cause of one's downfall

"May I deal with honour
May I act with courage
May I achieve humility" - from Dick Francis's Straight

Cheers

[Account Deleted]

Respected DG

Can u please explain a TRUNCATED ZIGZAG as to where could it occur and what are its pattern implications.Can it occour as a F leg of a diametric and if it does then does it mean that the entire F leg will be retraced in the upcoming G leg

Thanx in Advance
VB

[EN]

Sounds like more bricks to build this wall of worry. Oh wait . . . bull markets climb a wall of worry . . . this must be one!

[DG]

VB,

A Truncated Zigzag can appear as wave-F of a Diametric and does typically indicate that the ensuing wave-G will retrace all of wave-F, with a minimum retracement of ~80%.

The c-wave of the Zigzag must be at least 38.2% of the a-wave, but not more than 61.8%.

The b-wave should not retrace more than 61.8% of the a-wave at its endpoint, although if wave-b subdivides it could retrace more than that.

[DG]

OK, here's a long set-up for the haters who would rather engage in name-calling than trade-calling. Long the SPY above 119.91 if it gets there before 10:55 AM ET.

[marketman]

Looks like you are LONG at 119.91

:)

[DG]

Yeah. The market showed strength by making it to that price before that time.

[Edwin]

DG...SPX 5 minute chart never rose above the value of 50 this morning. U call that strength? Bears rule so far until both price and RSI rise are above 50. Ops. I just gave away my trading secret. I would by on either real strength or DIVERGENCE only.

Good luck on your trade.

[Dow Predator]

True facts about the market:

Nasdaq 100 made new highs yesterday with negative breadth.
We could not go above 2044 (Fibonacci 84.1%), so odds are now that we are on a bearish triangle since the low of 2002, and we ended wave C up.

All the 120 minute oscillators are now pointing down and we are breaking the 1190 area, we now need a close below this area to have more bearish posibilities.

The daily oscillators diverged at the recent high... Bearish.

The market is due for a correction. As long as 2044 holds on the nasdaq 100, this market is in troubles short term, and that is what matters rihght now.

Dow Predator

[DG]

Edwin,

I don't use indicators, only price and time.

Look at the structure of the decline from 121.23 to this morning's low at 119.13. The "largest and fastest" correction upward within that structure was .77 SPY points and took 68 minutes. With the rally this morning being "larger and faster" than that rally, that is strength.

Will it continue? I don't know.

[Bird]

DG, based on your research, what % of the larger and faster triggers result in profitable trades? What is the average reward/risk?

[Michael]

"All the 120 minute oscillators are now pointing down and we are breaking the 1190 area, we now need a close below this area to have more bearish posibilities." - Predator

Agreed.
Problem is, we are still trading 1196.50 in the SPX.

[DG]

Bird,

With over 100 trades now (some of those are backtests because I just finalized the strategy in January, but the rules are exactly the same), the winning % is 62% and the end result gain/loss is just a hair over 2 to 1. It's not a forecasting-based system, so I don't try to figure out risk-reward in advance.

[Michael]

Make that 1201.85 SPX.

:)

[DG]

Stopped out of long. I have no idea where the market goes from here, though. We could still make another high. Dunno.

[Dow Predator]

After today's action..

Odds are that we are making a triangle and we are headed to the 61.8% area around 1224-1222, next week.

We need to break today's low to be bearish. As long as that low holds we are still on a bull trend short term.

Dow Predator

[Account Deleted]

Respected DG,

Thanx for your previous reply.

If could please explain whether the appearance of a Diametric matters as regards its breakout potential.Meaning a BOW TIE shaped Diametric almost always gives a breakout on the Downside with initial Part(A B C D legs) looking like a Contracting Triangle and the F and G expand.If yes then how would a Diametric which gives an upside breakout look like as regards the shape and appearance are concerned.

Regards
VB

[DG]

VB

Neely addressed this in one of his Question of the Week replies. From his response, it doesn't appear that whether the Diametric contracts first or expands first matters for post-pattern behavior.

Question:
When you have a diametric formation, and wave "G" has finished, what can be expected afterward (price and time)?
Answer:
This is a "high level" question, so if you are not serious about wave theory, don't continue.

The post-pattern action following a Diametric is not dependent on the Diametric itself (as with most other wave formations), but relies on the larger pattern the Diametric concludes. For example, did the Diametric end wave-A of a larger Flat or Triangle; was it wave-2, wave-4, wave-x, etc.

In order of priority, these are the things you can expect following wave-G of a Diametric. The wave right after wave-G will be larger and faster than any "same direction" leg that occurred during wave-G. Next, if that post-G-wave is also larger and faster than waves-B, D and F within the Diametric, then the Diametric ends a single leg of a larger formation.

If the move after wave-G is not larger and faster than waves-B, D and F, then an X-wave is probably forming. Otherwise, the Diametric will be one leg of a larger, ongoing pattern OR it will be wave-1 or 3 of a Terminal formation.

[Michael]

Make that 1208 SPX.

:)

[Harry]

With over 100 trades now (some of those are backtests because I just finalized the strategy in January, but the rules are exactly the same), the winning % is 62% and the end result gain/loss is just a hair over 2 to 1.

Is that taking every trade mechanically, or is there some discretion involved?

[DG]

Harry,

That's the mechanical way. I do reserve the right to not enter on a signal, though. The discretionary stats are slightly better, but everyone will make different choices in that context, so I figured that the mechanical is the best reflection of the overall edge.