Different Day, Same Rigged “Markets”

In a stunning example of just how rigged “markets” are, the ECB just announced [full text below] the biggest increase in Greece’s credit line in months.  The kicker?  It came at precisely the moment when SPX most needed a boost to break out of a falling channel and top its 50-day moving average.

This is what happened — shown on a 1-min chart to make it perfectly clear:

2015-06-10 SPX 1 0840The daily chart we posted yesterday shows how important 2100 was from a technical standpoint.  It represented both the top of a pretty well-formed falling channel and the 50-day moving average.

2015-06-09 SPX daily 1037A reversal here, and the next stop is lower — possibly a lot lower according to the charts.  A reversal would have been quite detrimental to the bullish meme that folks like Bloomberg are paid quite well to spread.

The risk was elevated because, earlier today, BoJ’s Kuroda announced to the Japanese parliament that he saw no reason for the yen to fall any further.

“The yen is unlikely to weaken further in real effective terms if you think with common sense, given how far it has come,” Kuroda said in parliament Wednesday.

So, it was incredibly important to prove to the investing world that the yen carry trade isn’t that important to rising stock prices — which, of course, is a total crock. [see HERE]

Is it possible that the timing of the announcement was a coincidence, and had nothing to do with the “market’s” need for a breakout?  In a rainbow-farting unicorn world, I suppose.  But, if you’ve taken the red pill, you know better.

Any doubt should be removed by the release of a second article a few minutes later (might as well go for the 10-day moving average, too) that Germany was to offer Greece a deal on aid as long as they really, really promise to do something this time.  Bloomberg, quoting the always reliable “one person”:

To convince creditors that Greece is serious, Tsipras would have to take tangible action, for instance introducing reform legislation in the Greek parliament, one person said. If Greek officials move quickly, funds could be released in early July, the person said.

Updated chart:

2015-06-10 SPX 1 0933Sometimes it really sucks to be right.  From this morning’s members’ section, shortly before the breakout:

EURUSD is the one driver that seems to have plenty of upside potential.  Of course, it’s swimming upstream given the steady stream of negative news regarding the Greece negotiations.

It goes without saying, but a very positive development (or rumor thereof) is a serious threat to any short position (trade safely, use stops.)

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The full text of both Bloomberg articles (and, shame on you, Bloomberg, for being such a tool):

ECB Said to Raise Greece’s ELA Ceiling by Most Since February

The European Central Bank raised the level of emergency cash available to Greek banks by 2.3 billion euros ($2.6 billion), people familiar with the decision said.

The Governing Council increased the limit on Emergency Liquidity Assistance to 83 billion euros in a telephone conference on Wednesday, the people said, asking not to be named because the discussion was private. That’s the biggest weekly increase since Feb. 18. Governors kept the discounts on the securities pledged as collateral against ELA unchanged, the people said. An ECB spokesman declined to comment.

The ECB is trying to strike a balance between keeping Greek lenders afloat and safeguarding the country’s central bank, which provides the aid, as the government veers toward a debt default. Greek Prime Minister Alexis Tsipras aims to meet German Chancellor Angela Merkel and French President Francois Hollande in Brussels on Wednesday to try to break a deadlock in bailout talks.

 ELA “has to be weighed against the risk of overturning the entire Greek financial system,” ECB Executive Board member Yves Mersch said in Frankfurt on Monday. “The risk of saying no would be to plunge a whole financial system into chaos.”

The emergency aid is intended to replace deposit outflows from Greek banks amid uncertainty over the country’s future. International talks this week failed to make progress after Greece submitted a budget-deficit plan that creditors considered unfit for purpose, according to two officials directly involved in the process.

Accident Risk

Merkel is willing to sit down with the Greek leader if he requests a meeting, government spokeswoman Christiane Wirtz told reporters in Berlin.

“With the risk of a default increasing, and possibly leading to an exit ‘by accident’ from the euro zone, deposit outflows are likely to continue,” Barclays Plc economists Philippe Gudin and Antonio Garcia Pascual said in a client note. “If there is no sufficient progress in the coming weeks and should creditors not officially extend the program ending in June, then we believe in all likelihood the Eurosystem would not be able to continue funding Greek banks under the same terms.”

The total level of available ELA has risen by more than 23 billion euros since February, when the ECB locked Greek banks out of regular refinancing operations. The Governing Council reviews the amount weekly and can restrict the funding. It also has the power to insist on higher discounts on the collateral banks post to receive the cash.

“We look each week at these issues of bank solvency and collateral quality and as long as these are in place I don’t think there is a basis for taking a different decision,” ECB Governing Council member Ardo Hansson told reporters in Tallinn on Wednesday. “If things change — the quality of the collateral, for instance, or the outlook for Greek govt debt sustainability — then you factor those in and reassess.”

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Germany to Consider Offering Tsipras Staggered Deal on Aid

Chancellor Angela Merkel’s government may be satisfied with Greece committing to at least one economic reform sought by creditors to open the door to bailout funds, according to two people familiar with Germany’s position.

While the Germans still insist on a package of steps that includes higher taxes, state asset sales and less generous retirement benefits, they may settle for a clear commitment by the Greek government to a measure up front to unlock aid, said the people, who asked not to be identified discussing the government’s negotiating stance.

With Greece’s aid program set to expire on June 30 and no deal in sight, the comments reflect more German flexibility than the government’s public statements. Merkel and French President Francois Hollande may hold talks with Greek Prime Minister Alexis Tsipras on the sidelines of a European Union summit on Wednesday to try to break the impasse.

 “Where there’s a will, there’s a way,” Merkel told reporters as she arrived in Brussels. “The goal is to keep Greece in the euro area.”

Merkel says Greece must honor an accord struck with its euro-area partners in February that gave Tsipras an extra four months to carry out economic reforms needed to unlock its final aid installment of 7.2 billion euros ($7.6 billion). The chancellor hasn’t spelled out details of a possible deal in public and said that whatever measures Tsipras undertakes, they have to “add up” to make Greece’s debt load sustainable.

Giving Time

While Tsipras could be given until next year to carry out changes, such as trimming retirement benefits, he would have to initiate at least one major overhaul if he wants to get aid flowing, the people said. Neither person specified which demand Greece should fulfill.

Merkel’s chief spokesman, Steffen Seibert, and his deputy Christiane Wirtz didn’t return text messages seeking comment. A German Finance Ministry spokeswoman declined to comment.

To convince creditors that Greece is serious, Tsipras would have to take tangible action, for instance introducing reform legislation in the Greek parliament, one person said. If Greek officials move quickly, funds could be released in early July, the person said.

Germany also wouldn’t object to extending the aid program again if Tsipras presents specific policies to meet the goals of the memorandum of understanding agreed with Greece’s euro-area partners on Feb. 20, the people said. They didn’t say how long such an extension might run.


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