SPDR S&P 500 (SPY)

[Belek]

Phoenix Capital Research writes.........

February 10, 2015

The Euro Senses a Grexit... Stocks Don't

Thee S&P 500 continues to trade in a tight range. Despite all the moves over the last two months, we’ve really gone nowhere.


These kinds of consolidation periods are usually followed by violent breakouts. The problem is you never know which way it’s going to break.

The bigger story concerns Europe, particularly Greece, where the crisis has finally evolved from finance and banking into politics. Previously each round of negotiations regarding Greek bailouts involved politicians who derived all of their power from bankers and the financial elite. As a result, all previous negotiations ended in the banks being propped up while the Greek economy imploded.

This time around Greece has a newly-elected Prime Minister with enough political capital to tell the EU and the ECB to get lost. The risks of leaving the EU are much smaller as there is no hope of another bailout making anything better. Moreover, Russia is standing in the wings ready to provide aid to anyone who would help Putin break open the EU political alliances. Greece knows this. So there is a Plan "B."

No one knows how exactly this situation will play out. But the odds regarding a Grexit are much higher than before. The market senses this which is why the Euro took out the support line that held it up throughout the first round of the EU Crisis: 2010-2012.

Time and again, no matter how bad things were in Europe, the Euro failed to take out this line. Not this time.