Greece again. There is nothing in reality TV to match this.
The Greek debt deal that boosted the S&P500 mini futures (ESU5) by more than 60 points in four days and pushed the Dow Jones Industrial Average back above 18,000 is now looking a little shaky. Shaky, as in need of life support.
One of the major creditors, the IMF, has leaked a report saying Greece’s debt is “unsustainable,” which means it can never be paid back. That isn’t news – it was unsustainable in 2010 when it was about half as large — but the IMF has now remembered that its rules prohibit loaning more money under those circumstances. So the Fund is calling for “debt relief” on a very large scale. None of the other creditors – i.e. Germany — will agree.
If this sounds like déjà vu all over again, it is. Been there, done that. The alleged deal still has to pass seven national legislatures before it can be implemented (the Greeks vote this morning) but Greece needs bridge financing immediately. Nobody is willing to provide it because the chances it will be paid back are slim.
The creditors are openly squabbling, and some of the existing terms are virtually impossible. Greece is supposed to raise $55 billion by selling public infrastructure; the last time they tried this, the take was about $3.4 billion.
The odds against this deal being done are long and getting longer. The odds against the deal holding up if it does get done are even longer. Where does that leave the stock market rally?
Greece is a very pleasant place with about the same population and about half the GDP of Los Angeles County. We’re spending too much time on this.
Today
The ESU5 closed Tuesday at 2102, eight points above the previous close. The volume was weak; in fact the volume has been decreasing every day during this rally. There is a lot of suspicion about this advance.
Today we expect a narrow range sideways movement, which could repeat yesterday’s range 2106 to 2090 if overnight trading doesn’t go higher. 2082-84 will remain key support for today. As long as this zone holds up, buy-the-dip Bulls will try to push the price back to the 2100-05 zone (Tuesday’s high). A move above 2107 level could start a grinding, inch-by-inch move higher.
Major support levels for Wednesday: 2054-52, 2038-39, 2028-30;
major resistance levels: 2108-12.50, 2118.50-21.75
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Chart: S&P500 mini-futures (ESU5) July 14, 2015
