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Support and MSP for What appears to be a Pivotal Week Coming Up

With the obvious situation impacting the world of total disintegration of central bank cooperation - to expected effect, we now have the addition of extremely high pressure on Chinese investment firms and institutions to sell everything that is not glued down and that is NOT a Chinese asset. If they can not sell a Chinese asset or share without going to jail the next best thing is to apparently blow it up and also to sell non-domestic assets - such as US stocks, European Stocks and anything else that is not glued down that the Chinese officials will not arrest them for. If this capitulation is to continue things can get very messy indeed. But before we throw out the baby with the bath water, let's take a look at what the markets would be expected to do if the third transaction type for fund managers were not "BLOW IT UP".

DAX and Euro Stoxx are at inflection points and can start a large rally and by the looks of things, would potentially be very painful for shorts. Longs are already in pain and it seems they need to sell too just so the pain is shared more equitably. Funny how that is centrally planned. But in any case, there appear to be quite a lot of influences coming up that imply a convergence to the upside that by the looks of things could be swift. IF we can not get the hint of some traction to this structure, then it should be apparent that the brakes are not working and likely the ground is moving which could imply a "crash". Crashes are rare, even though this feels like a crash already, nonetheless, the urge to get emotionally involved in a crash is not usually a highly rewarding one and caution is warranted. It is common for us to stress that most money earned from trading is not on huge winning trades but on normal base hits. We have worked very hard to increase the odds on base hits and to be open to larger trades when they happen. We also have worked hard to developed tools and approaches to handle a crash or very powerful trend. However, it must be restated that smart and judicious trading is far more rewarding than big winners followed by a string of many losses of arbitrary size - usually larger than the large winners, though. This is why we can not overstate that the potential of this change in psychology in the markets will take more than a few days and the opportunity has not even started yet...patience and restraint are highly rewarded. Buying multimillion dollar jet planes before you've closed what appear to be gigantic winning trades is equally unrewarding. So, in all the lessons we can reinforce, patience, discipline, and clarity is key NOW.

Below are various charts that may help put some perspective on where the market is standing. On the Historical eTickTools Emotional Extremes - Support and Resistance Chart note, that one fo the objective is to show thin zones and also to show areas of congestion. Brighter or more intense colors indicate stronger influence, Light colors indicate previous resistances and darker colors are previous supports.

Historical eTickTools Emotional Extremes - Support and Resistance

Historical eTickTools Emotional Extremes - Support and Resistance

DAX Daily And Weekly Market Structure Projections

DAX Daily And Weekly Market Structure Projections

Euro Stoxx 50 - Daily And Weekly Market Structure Projections

Euro Stoxx 50 - Daily And Weekly Market Structure Projections

Oil - Daily And Weekly Market Structure Projections

Oil - Daily And Weekly Market Structure Projections

US Dollar - Daily And Weekly Market Structure Projections

US Dollar - Daily And Weekly Market Structure Projections

EURO Broken, Breaking and Broke – Greece Plays Its Hand

EURO Broken, Breaking and  Broke

EURO Broken, Breaking, and Broke

The ECB thought they could back the Greek Government and leadership into a corner with no other choice than an insipid self-destruction that would have left them, culpable, maligned and threatened by their own nation. Soon to be replaced by a trinket government installed at the whim of a few EURO bureaucrats (or Neo-Nazis - take your pick).

Greece played it about as well as possible. Knowing that the objective of ECB and Germany was to make sure that no other political administration in the crumbling European Union would ever be willing to commit such an act of defiance and humiliation against central planners. They waited till after markets had closed to announce a referendum and to "stick the finger" to the central planners (see ECB & EU Strategy – Political, Not Practical). During the afternoon on Friday, Greece made overtures but just after the close of the markets they gave no wriggle room to a central bank that thought it owned the outcome of the situation.

This era, characterized by the senseless debt pumping by central planning bureaucrats all over the world, has destroyed many lives and is presently in the process of destroying millions more - which will inevitably be the driving force of more complex conflicts between nations. The fact is that, via side deals and convoluted transactions with the US FED, virtually all sovereign central banks operate US FED policy by proxy. Almost all of them are precariously close to losing control of the leverage they have been so desperate to pretend is a catalyst to growth when in fact it is clearly the opposite (see these charts). IMF and BIS have been projecting wild fantasies regarding Greek growth for years. As it appears, these delusions are influenced by blind deference to the concept that something can be created out of nothing by a few bankers with a "control-P" key. Sadly this is not the situation as so clearly shown in IMAGINARY NUMBERS. With so little real capital available and so much leverage, even a little disruption can have grave implications. The next months and weeks will likely reveal more regarding leverage (more accurately deleveraging) implications.

Leverage - Where are we now?

Leverage - Where are we now?

These crises arising all over the world may be a catharsis for people in the end, but it will be one of the most painful paths possible for rejuvenation. From this perspective, Greece knows they are in pain, it can not get much more intense for them. What you can not pay for does not get paid - so, there is somewhat of a limit. BUT IT CAN GET VERY PAINFUL for debt-pushing central-planners. The implications of huge and contagious CDS & derivatives losses, financial instability and challenges that are all pointed at the feet and minds of central planners (as opposed to indebted governments) is likely to be a trend.

If there is one lesson from Greece, it is while the drug is offered - take it. When the drug causes ill health and death, for the history books, make sure its manufacturers and pushers get the blame.