The elections in Greece and France over the weekend were interesting, with that clown Sarkozy replaced by a socialist with a clear mandate for bigger government, higher taxes and deficits, and also a mandate to try to steer Europe in the same direction. The two main greek parties, in coalition, will also no longer have a majority and their ability to deliver on their commitments to the ECB and IMF is very much in doubt. The stage is being set here for chaos in Europe and a summer pullback on equities. The question here is whether that summer pullback has already started.
I think not, on balance, though the failure of some very nice bull patterns last week on multiple indices is a serious warning signal. I might be mistaken though, and on SPX I'm watching the key 1340 level to see whether it holds this week. If it doesn't then the answer might be yes. For today the lower bollinger band on SPX is at 1355 and I'd expect to see some support there:
On ES the reaction to the elections was strong, with ES undercutting both of the April lows and reaching a low on the 60min RSI not seen since last year. ES is bouncing at the moment and that might run further today. I have the opening gap on ES at 1361.50 and that's an obvious target:
EURUSD undercut the February and March lows overnight and is in a clear downtrend. I mentioned last week that the H&S on EURUSD was still in play and it gapped under the H&S neckline at the Sunday open. I'm looking to see whether there is any resistance at the neckline in the 1.306 area today. The H&S target is in the 1.27 area and I also have some possible channel support there parallel to the clear resistance trendline down from the March high
Overall still in downtrend but we might see some more bounce today. Just a short post today as it's a holiday here in the UK and I'm going to the carnival with the family.
