In a Word — Greece

Sorry Greece, but I fail to understand how a country with the economic impact of the state of Louisiana can erode nearly¬†one¬†trillion dollars in wealth from the global capital markets! The $1.6 billion payment due to the IMF is equivalent to approximately one day of revenue from Walmart! The story line just got better as the day progressed relative to the stats about the size of the Greek economy. The real challenge… my perspective is the rest of Europe isn’t in much better shape debt-to-GDP. If you remember the PIGS (Portugal, Italy, Greece and Spain) they are all still struggling with the same issues as Greece. If the snowball begins to roll down the hill the concern is how the EU will survive. Isn’t this¬†always the way… we have to take a Greek tragedy and turn into a worldwide dilemma. Overreaction? Yes, based on what we know currently. Speculation jumped in the driver seat as you would expect based on the fact the ultimatum was given for the weekend decision. Time will tell or the¬†referendum to be voted on July 5th? Starting to get ugly and we will see how it all unfolds going forward. I am not ruling out that this is the catalyst for the sellers who have been looking for a reason to exit the markets near term. Watching as it unfolds this week.

China was lower again overnight and it is now down 14% off the April highs. Some headlines were blaming Greece! I am not inclined to go along with that story, but it is believable that the Chinese economy is slowing to reflect all the inflated prices versus the lack of growth of late. FXI broke support at the $46.50 mark and the next level is $44. Selling acceleration is not a good sign for the outlook. FXP is in play for now.

Europe drove lower as you would expect, but the 3% decline broke support at $45 on IEV and testing $44.10 today. The move also breaks the uptrend line putting the downside trade clearly in play. EPV is the short ETF for Europe. Germany (-3.5%), Spain (-4.5%), Italy (-5%), Portugal (-5.4%) and Belgium (-2.3%) all reacted to the news and the outlook could get worse before it gets better.

The US markets of course reacted to the doom set out in the headlines today selling 1.5% on the day in the broad market indexes. The VIX index spiked higher hitting 18.5 and breaking well above the four month trading range near the lows. This signals the impact of uncertainty from speculative events. Investors want to have some semblance of clarity about the future and the issue with Greece puts plenty of question marks in the path of the markets worldwide. As we have stated may time… there is plenty to consider as this all unfolds… and not all of them are positive.

Volume spiked on the selling as you would expect… the sell first and ask questions later mindset is very much in play. The ten-year bond yields fell 15 basis points in one day! Flight to quality or fear as a driver showed up in full color today. All the talk of money rotating into equities and away from bonds as the Fed considers hiking rates lost all its steam today… something to watch as this unfolds as well.

Pending homes sales were the highest in nine year… but that was lost in the Greece news. ITB and XHB have been moving higher, but they failed to capitalize on the news today as there were bigger fish¬†to fry.

The Supreme Court has been busy making headlines and the ruling considering the EPA needing to consider cost when regulating pollution caused by coal burning plants definitely helped the coals miners. BTU, ACI, ANR, CLD were all higher on the day.

As the first half of the year winds down, you have to wonder what is in store for the second half. Today made the outlook a lot more cloudy than it was a week ago. I am sure there will plenty on projections to come this week. It was a news filled day with plenty of damage done to charts technically and to investors psychologically.