Markets closed up yet again but are still running into some staunch overhead resistance. The next few days should be telling as to whether or not the bulls are for real or if the bears are just letting them gain a little confidence before beating them back down again.
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The Greek Parliament sold out its people once again today and there is one more vote that will come down tomorrow to determine the specific measures that will be employed to destroy the life style of Greeks and pillage their public coffers. I've written a lot about the concept of these austerity measures, but let's review a list of these changes to see how it might impact the everyday lives of Greek citizens. I've used this slide show from CNBC as a source –
TOP 10 AUSTERITY MEASURES IN GREEK BAILOUT PLAN
1) Property taxes and their VAT (Value Added Tax) will increase. Their current VAT is 19% on each item purchased, it will increase to 23%.
2) Luxury items will be taxed more and profitable businesses will also receive an additional tax.
3) Taxes on fuel, cigarettes, and alcohol will increase by 33%
4) Civil servants and other government workers will take 15% pay cuts
5) Defense spending will be cut by 200 million euros and more in following years
6) Education cuts will force mergers and closings of almost 2000 schools.
7) Social security programs will face significant cuts and the retirement age will be raised from 61 to age 65.
8) Greek government businesses will be privatized.
9) Government jobs will be terminated via attrition. Only 1 job out of every 10 retiring positions will be filled.
10) Health care spending will be cut by 310 million euros this year and more in subsequent years.
CUTS ARE GOOD RIGHT?
Well, yes and no. Financial management of programs and social services are necessary, and the Greeks obviously didn't do a good job over the last 30 years of maintaining any sense of responsibility. The issue here is that these measures will be debilitating AND they will not make any dent in the piles of debt that have been amassed. The Greeks are past cutting to be able to repay all of these obligations; the figures are just insurmountable.
Take a close look at these provisions and it is clear that any normal person is going to get crushed as a result. Perhaps you are employed by the government or employed by a firm that provides a service or product to government. If you do keep your job, you will obviously take a substantial pay cut. Next, your fuel costs are going to rise and your property taxes are also going to increase. You health care costs too will be noticeably higher, and everything you buy will cost 4% more due to the move up in the VAT.
EXODUS OF EARNERS AND SMART MONEY
Any able bodied person that has any financial means will obviously be encouraged to employ any tax avoidance scheme possible. I would assume that high income earners would attempt to move to another country or at least off-shore their earnings and assets to shield them from these provisions. Clearly these efforts will undermine the financial projections of GDP and Greece will miss revenue targets, only to repeat the crisis again and again.
Is there any doubt why people are rioting? Is there any doubt there is a disconnect between the people of Greece and their politicians? No one questions that the Greek citizens did have a part in getting into this mess. However, it is quite possible that corrupt Greek leaders were bribed into taking bad loans that were not in the interest of their people. These politicians used the proceeds to hire unions and fund projects that were a form of political payback rather than society-enhancing endeavors.
The move this morning does nothing but extend the process for Greek to default on unpayable liabilities. Major life style changes and hardships will be endured by common folk while connected politicians and the wealthy remain relatively comfortable. For more information about this topic, please read – GREEKS NEED A HERO - IS THERE ONE? The posting includes the documentary "Debtocracy" which is a must watch.
USA TAKE NOTICE –
This is the future of the USA if we don't take measures to arrest our spending deficits and our out of control entitlement programs. We continue to look at Greece as some third world country that can't get its act together, but the reality is that the country is simply playing out our future today.
In the midst of seeing all of the results from catastrophic debt it is clear that the USA is rushing headlong into policies and promises that emulate the European model. Unfortunately it is obvious that we'll be implementing many of the same austerity measures to pay back our lenders too. Please visit the blog at www.goatmug.blogspot.com for timely macro-economic commentary!
It's Brian Johnson with a quick market update on where we currently stand in the markets with that break up and over 1300 in the SPX.
There are dozens of folks who are able to post guest content, and this would be a great time for any of you to chime in with a post or two. Springheel Jack has saved my bacon all week (even moreso than he usually does) with his posts, but there are bound to be other contributions out there during this "lean week".
This is little more than a comment cleaner, and given how the markets did yet another fake-out this morning, I'm not particularly chatty anyway.
I'm slightly shaken by the strength of this move up. I had a very nice setup for a reversal at 1300 ES which broke overnight and I wasn't expecting that:
I have another nice setup for NQ to make a short term high just under 2300 and I'm now wondering if that will hold:
TF made my 814.1 rectangle target and kept on going. I don't have any particularly obvious reversal levels I'm looking at there though like the other two it is looking very overbought on the 60min charts:
If SPX can hold 1300 today then the next obvious target on the daily chart is the daily 50 SMA at 1316.89, which is in the same area as the top of the bollinger band. Not that far away now:
In terms of USD, my target for the broken rising wedge is at 74.84, and DX is at 75.15 now. I'm thinking it may overshoot somewhat, as one EURUSD gets over the lat big high at 1.4445, then the obvious target in my view would be declining resistance in the 1.45 to 1.454 area, depending on the time taken to reach that target. That is a natural reversal level for what may well be a large symmetrical triangle. I'm also considering 1.45 as a possible IHS neckline. Regardless of the target EURUSD has formed a rising channel from the last low and I'd expect a hit of the lower channel trendline before the upside target is hit:
Silver has been recovering somewhat in the last day and I'm wondering about a retest of broken support in the 35.2 area. I do still have a smaller declining channel in play though, so we could see a move to the 36.25 to touch the upper trendline there:
Oil has recovered into the strong 94-96 resistance area. I'm not expecting to see a daily close over 96.25, but if we do see that it would look bullish. Neither technicals nor geopolitics favor a big move up on oil here though, so I'd be surprised to see that:
Overall I'm looking for some retracement soon, not least because without retracements I don't get a lot to work with in terms of trendlines. Equities are looking very oversold and at the time of writing my resistance level on NQ is holding so that might well be here. If not I'm seeing a lot of resistance in the 1311 ES area, which is also the area for the daily 50 SMA on SPX and the top of the daily SPX bollinger band.