Courtesy of John Nyaradi
Global stock markets rallied for a third day on the news that Greece might stave off default as the Parliament passed its austerity plan while rioters set the Ministry of Finance building on fire in protest.
Now the key question for U.S. ETF investors is, “Can the bounce continue?
This week should provide many answers as the Greek drama unfolds, the debt ceiling debate continues and key economic reports come in on Thursday and Friday.
On Thursday comes a much more crucial vote for actual implementation of the tax hikes and cuts necessary to make this all happen and that debate is scheduled to start at 10:00 a.m. Athens times with no scheduled time for a vote.
The Greek two year bond interest rate is still north of 27% which outlines the real danger here and that is that the Greeks themselves don’t step up to the table and actually deliver the austerity plan necessary to get their next round of bailout money.
Thursday will be a crucial day.
Meanwhile at home the budget deficit debate goes on with President Obama calling for new stimulus which would add to deficits rather than trim them and so substantially complicates the already stalled talks between congress and the White House.
Watching from the sidelines, S&P said it would immediately downgrade U.S. debt to “D” if misses a debt payment on August 4th and the International Monetary Fund said that the debt ceiling should be raised soon to avoid a “severe shock: to the economy and world financial markets.
On a technical basis, the S&P 500 (spy) has bounced off its 200 Day Moving Average and now faces significant resistance at current levels and the 50 Day Moving Average just above as seen in the chart below.
chart courtesy of www.stockcharts.com
Greece and two significant economic reports, Chicago PMI on Thursday and ISM on Friday will determine if the bounce can continue into and after the long holiday weekend.
We truly are living in historic and nail biting times.
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