Greece heats up the market-Get your shorts on?

With continuing fears over Greece, and the market not believing that it will be able to sustain a spending cut that would allow it to prevent a default, the yield on Greek 2Yr Bonds currently around 16%. Despite solid earnings and the Dow reaching a high of 11200 in the previous weeks, and even coming back to 11150's yesterday, even good earnings results from the likes of UBS cannot hold off the market. Fears of contagion with Portugal recently being downgraded, and widening of spreads of Portuguese and Spanish bonds, has raised fears in the market that there is more to this "debt crisis" as previously thought.

Yes companies earnings are outperforming, however with Q1 results soon to draw to an end, the balance of news moving the markets will be between debt related news from the P.I.G.S versus the likely improvements in American indicators. And no doubt the debt related news from the P.I.G.S will be more heavily weighted.

Quotes:

Dow 10914
FTSE 5410
EUR/USD 12900!!
GBP/USD 15140
Crude 8207
Barclays 323
RBS 50.8
Xstrata 10.02
USD Index 83.48!!

The miners have been undergoing a correction for the past few weeks, as contnuing fears over the impact of the Greece situation and fears starting to grow over a possible bubble in China (specifically in the housing market, and its relationship with homebuilders, and industrial metals).

Where the USD Index was recently dropping down to 79-80 region, the massive burst in volatility and rise in greek yields has spurred a flight to quality, risk aversion rally with US treasury yields dropping.

The DOW having today broken its 20 day moving average, and currently sitting close to its 50 day moving average at 10900, a solid break to around 10880, would be a good shorting opportunity targeting 10750 (with a stop at 11005). However with Non farm payrolls due for release on Friday (and the possibility of a large increase of 100k or 200k jobs) this is an uncertain proposition. However, although we cannot gage the dynamic of the market til the night before, it stands to be a reasonable possibility that even a big decrease in the unemployment rate, and a 100-150 pt rally, may prove only temporary as Greece and debt related news will no likely dominate over the coming weeks.

Cure oil inventories due to come out this week, are likely to indicate a further increase in supply (as the price of $82 is largely a result of perception of future demand based on the expected demand of China and the recovering global economy), so I would expect a possible drop to the mid to lower 70's if the price manages to break support at the $79.50 level.

Financial stocks continuing a week long correction, aided by underperforming earnings by Barclays, and also possible default related losses from the Eurozone, as well as their general beta correlation to general market sentiment. However trend line still remains in tact, buying would be a matter of ones conviction on the contagion aspect of Greece.


Trading Strategies:

Short EUR/USD at 1.295 Stop 1.305 Target 1.25 with no support til 1.25, and resistance at 1.30 is a good risk/reward ratio for a shorting opportunity.
Duration:1-2 weeks, Exit conditions: If you feel there is extensive proof to a resolution of the Eurozone debt fears

Buy Gold at 1169, and to be bought until 1165 stop, with an upside target of 1220 in 2-3 weeks. Also a great beta hedge with the EUR/USD play above, as they are usually negatively correlated.

Short Dow at 10885, Stop 11012 Target 10750.
Exit Conditions; Non Farm Payrolls shows amazing improvement in American Economy, and the Dow breaks strongly above 11000, so 11030s.

Short FTSE? Although it is likely that a hung parliament will result from the election on Thursday, market reactions I do not feel have been too pessimistic about this (looking at GBP/USD still above 1.50 also), so although there is a technically strong shorting possibility witha stop at 5600, targeting 5000 this would have to be combined with, in my opinion a bet on the election outcome or played after the election result (Which I feel may even provide a short term bounce to the market with a Conservative victory).