Greek Bailout Proves to be a Mirage: All Eyes Turn to the Brussels Summit Next Week, Attack of the Killer Bearish Inputs on Equities Going Into the Final Full Week of Q1 2010

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Greek Bailout Mirage

Friday, 19 March 2010 14:38

Bearish inputs are expected from the Feb existing home sales on Tuesday and Feb New Home sales on Wednesday. (Remember, the weather out East in Feb was god-awful, so don’t expect any statistically significant improvement from these two reports next week ~ it ain’t gonna be happening, short of an Act of God or Act of Congress ).

Not only are Existing and New Home sales going to be bearish inputs for equities next week. But, guess Greece’s woes returned in full bloom this morning. To wit, the European plan to provide aid to Greece unraveled overnight. Oh yes, the Greek bailout can not pass German law. The no-bailout clause would violate German constitutional law says Ambrose Evans-Pritchard ~ The proposed EU Greek bail-out cannot simply bypass German law. Perhaps, the Germans threw that clause in there explicitly for the purpose of invoking it if needed. Perhaps too, that is why the head of Germany's Ifo economic research institute Hans-Werner Sinn said that the best way to solve the Greek financial crisis would be for Greece to leave the Eurozone. "I would recommend that Greece leaves the European Monetary Union.” The country should then devalue its currency and a debt moratorium should be put in place, he proposed. "This would be cheaper [for the other Eurozone countries] then to permanently finance Greece." Other German officials suggested Greece just go to the IMF. However, Greece’s Prime Minister George Papandreou, considering next week’s EU summit in Brussell’s, expressed his last hope: “This is an opportunity we should not miss…tell the markets hands off, no speculation, let this country do what it’s doing” ~ Papandreou Urges EU Emergency Plan After German Officials Suggest IMF Aid.

So, the broader question isn’t where can support be found in the SP500 be found for this week, but where can support be found next week? And more importantly when is that dang EU summit in Brussels, Wednesday or Thursday? How does the EU Summit timetable dovetail with the bearish inputs from existing and new home sales next week?

Support for the balance of this week can be found simply enough at last week’s high at 1152 and the Jan high on the continuation chart at 1148. But if the market has to absorb bearish inputs into Wednesday March 24 and Thursday March 25, the broader question is where can support be expected to be found next week and what will resolve it to the upside? Broader support in the following week can be expected at this week’s lows at 1136 and the Jan 2010 highs at 1128. One pricing model suggests a double bottom near last week’s lows at 1136.

Then the question becomes what will enable bull trend resumption. One upside resolution for the stock market is to put the home sales reports for February behind it. A second resolution would be to put the EU Summit and Greece fiscal crisis behind it. A third catalyst for higher would be the bullish outlook for the following week’s economic data. Monday March 29 is personal income (should be bullish), Tuesday March 30 is consumer confidence (bullish) Wed March 31 Chi-PMI (bullish), Thursday April 1 ISM and jobless claims (bullish), and Friday April 2 NFP (bullish).

Beyond that, the Q1 earnings season should be another bullish input, as will existing and new home sales for March 2010 when announced in late April, assuming the data for February was bad due to non-recurring weather related issues. }

Georgia Anderson` Financial News Network, trader, trader education, online forex, daytrader,forex currency, forex software, investors, forex trading, forex.

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