What The First Greek Bailout Can Predict About Market's Direction Over The Next Few Days

Tyler Durden's picture

In days when vacuum tubes control the market with a sub-millisecond attention span, and contextual memory is irrelevant, the speculative audience may be forgiven if it has forgotten that the foregone conclusion of tomorrow's second Greek bailout (which will pass) is in any way unique. It isn't: it was just over a year ago today, on May 9, 2010 that Europe's Finance Ministers approved a trillion dollar rescue package aimed at ensuring financial stability across Europe by creating the European Financial Stability Facility. As part of the first bailout Greece got a €110 billion loan. One year later, and about 50% lower on Greek bonds, we are back, with Greece about to get a second, €120 billion+ (does anyone even know how big it is?) bailout, and there is not even one person alive who believes that within a year the third bailout of the insolvent Greek country (with even more stringent austerity measures) won't be on the table (even as the rating agencies are defending themselves in the Hague tribunal for crimes against humanity for their decision to proclaim the Greek bankruptcy as an "Event of Default'). But by then everyone will have printed another cool trillion or two, so who cares. It is all about the short-term. The expectation there is that the market will surge, surge, surge, once the event that has been priced in, gets repriced in over and over again, or something. Well, if history is any indication, as the chart below shows, those hoping for protracted market jump on tomorrow's vote will be disappointed.

We present the S&P performance in the week just before the May 9th announcement, and the two weeks later (incidentally, it is truly pathetic that $900 billion worth of QE2 can only buy not even 200 ES points in the past year). As can be seen in the highlighted candlestick, the market stages a nearly 30 point relief rally that Monday...only to fizzle two days later and to drop by over 100 point in the next 10 days (what happens next is irrelevant but ultimately was the reason for the launch of QE2).

So, now that we are in an identical situation, with just two more QE2 POMOs remaining, with comparable volume technicals (surge on escalator vapor, plunge on iceberg elevator), and with a Greek bailout catalyst, will the next two weeks see the S&P proceed to rise modestly to the 1,300 levels only to plunge immediately after down to the 1,200 level... and probably far lower since the Fed is now actively conspiring what is the best way to breach QE3/OT2 to the public.

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chump666's picture

Markets just priced in the yes vote, cept the bet is on that a yes/no vote  will come through + Greeks rioting = total sell

The 2nd bailout will be a total flop, market is overpriced.

Cassandra Syndrome's picture


The mood is far more sour and vengeful this time. The country will burn when the vote is passed.

Furthermore the EU is juggling 4 other countries that are in the process of falling apart as well. 2 of which are too big to fail.

TheFourthStooge-ing's picture

Time to break out the φανο? και τρ?αινες (torches and tridents).


GeneMarchbanks's picture

Mr Hendrix are you implying willful cunts are turning hot blooded American males into impotents?

Interesting theory...

KennyG09's picture

Nope not yet! Not when I can sip my new 'Merican flag patterned Budweiser. Now THIS is a recovery. lulz.

hound dog vigilante's picture

'Merican flag Bud... owned by Belgians. LOL.


This country is but a shadow of it's former self... so sad.


MS7's picture

I don't think the country will burn. In fact, if it doesn't, that will show that the "hooded youths" who cause all the trouble are really agent provocateurs. I will predict that the hooded ones won't be seen anymore after the vote, because then the mission will have been accomplished. So far the real protesters have been peaceful. They might throw some yoghurt or something, but they don't carry molotov cocktails... Still, the country will be ungovernable, as I believe there will be strikes without end.

Spitzer's picture

These are Europeans, they are commited

cahadjis's picture

We are Europeans, we are committed.


Seriously, we greeks are not cowards when it comes to being represented in parliament, as opposed to the whole of US who called in to complain about the 700billion bailout ... and then accepted it anyway without a whimper. Prepare for big fireworks if it';s a yes. And the politicians know this, being Greek too. So my bet is on a total rejection by a big margin.

Frankie Carbone's picture

That's something that I really admire about you Europeans. When our government fucks us over, we gripe for 10 minutes, if that, then take a swig of cheap American beer and flip on reality TV. 

You guys burn a major metropolitan region to the ground. 

Say, any chance you could send some advisors over to the New World here to help us out? 

papaswamp's picture

Delay and forget. This tactic will continue until all the people riot, not just the youth. This same trend will be seen in other european countries and someday in the US....unless the world wide community agrees to press the reset button for country debt. Personal debt will never get that.

oogs66's picture

they priced in the yes vote, and somehow decided the rollover the banks are falling all over themselves to participate in actually helps the Greeks and not the banks....haven't people learned that if the banks want to do something, it is probably not for someone else's benefit!

madmax1965's picture

Holy sh*t!  Yeah, if we could put that in the banksters martini's that would be awesome, however, why in the hell would someone willingly take that sh*t

awakened's picture

TPTB are both banker's and narcotrafficer's. They control the US govt and the NGO's (non governmental organizations). Drug profits fund the NGO's. It has been this way for a long time and will continue to be as such which is why we still have a problem in Mexico.


I quit smoking pot a long time ago due to not knowing where it was coming from. My decision was confirmed as correct after reading on the narcosphere about mycobacteria being used to eradicate pot and other drugs in Colombia and other Latin American countries by the US. Since I dont live in California I wont risk inhaling any substance that could contaminate what I would otherwise use medicinally.

The US is experimenting with all kinds of nanobacteria and other things that are nasty and can be used in bioweaponry. What better population to experiment than with than drug addicts? Few people really care since they seem to deserve it after all, right? <sarcasm off>

You will see drug addicts with all kinds of sores on their bodies, now apparently flesh eating. The newly reported bath salt drugs that have been rampant in the EU and are not yet illegal in the US are reportedly causing violent reactions and zombie-like behavior in the US.

My question is who are the criminals here? the drug addicts, or the people who are marketing these new drugs and horrendously experimenting on an unsuspecting population that is powerless over their addiction?

CrashisOptimistic's picture

It's not identical.

There is a difference.


SheepDog-One's picture

And about a thousand other things as well, its not the same at all.

Hit that junkie with some more free smack and watch it keel over dead.

Cdad's picture

...with a sub-millisecond attention span...the speculative audience may be forgiven if it has forgotten that the foregone conclusion of tomorrow's second Greek bailout...

Now...what did you say Tyler?  Could you repeat that thing about last year?  I have already forgotten since you wrote this post.




chump666's picture

The meltups were mania based.  When you have average Greek protesters saying the bailout is for French and German banks...I mean, there is no way a yes vote will be successful.

Brave traders betting against the trend.

monkeyshine's picture

 I don't consider myself brave, I consider myself crazy.  Though I have been and will be a buyer of EUO under 17.  I'm expecting to be able to sell it in the mid to low 20's in a few months, but, like I said, I am crazy.

buzzsaw99's picture

no-one on wall street believes the market will be allowed to set rates on the long end and they damn well know it is zirp 4 evah on the short end so nothing has materially changed to cause a market selloff. stock market sez: show me the 10y at 6% instead of three bitchez.

Modus's picture

100% agreed. in my opinion rates are the most important factor for the rally (resilience) in equities. i was teached the dividend-discount model in my first capital markets seminar and everyone who understands this model, will understand why stocks were and may still are a buy.

more fundamentaly i am bearish too. but from a perspective of the time value of moeny it makes much sense to be in equities. simple as that.

buzzsaw99's picture

In March 2009 one could have stepped effortlessly from t-bonds into stocks as if s/he were stepping off the bow of Titanic and onto an iceberg. It won't be so easy this time imo as it will have to be the reverse in operation. i.e. the bond market must crash first for there to be a big selloff in equities. That would cause unprecedented volatility, even bigger than the stock and junk bond crash of '08 - '09. Nobody believes it will happen, not even me.

Modus's picture

well opportunities come and go... that´s what markets are like. however i think if fundamentals should seriously weaken further this will be felt in equities. how fixed income and credit will trade after QE is running out is unclear to me although i too think a crash in bonds is highly unlikely in the near future.

how the financial marktes would look like in a bond crash still makes me thinking that we are indeed in unchartered territory here


buzzsaw99's picture

of course they might balance the budget thus stabilizing the treasury market. :snickers:

hamurobby's picture

I believe it is the euro/usd and their respective liquidity, not rates nor the s+p that are in the drivers seat at this point in time. Trichet could print a trillion euro and the sp and bond market might only quiver as the invisible hand on this side of the pond may levitate them at the same time. Who knows for sure, but relative correlations seem broken in the new normal.

buzzsaw99's picture

you are making the chicken/egg argument. if usa rates weren't artificially low i doubt what you wrote would exist for long. the 10y didn't even get to 4% last year before the equity market (egg) cracked. You are describing a symptom, we are discussing a causal relationship.

Cursive's picture


 i was teached the dividend-discount model in my first capital markets seminar and everyone who understands this model, will understand why stocks were and may still are a buy.

I understand CAPM, but did anyone ever teached (sic) you about the failures of closed systems?  Applying CAPM at this stage of the game is similar to digging a latrine with Hurricane Katrina bearing down on New Orleans: you will still be knee deep in shit when the storm hits.

Confuchius's picture

It would be interesting to have a picture of "the vacuum tubes controlling the market(s)".

vegas's picture

No vote: lookout below, can you say 1.3000 or below in the next week?

Yes vote: Wait for the Johnny-come-lately, thinly funded shorts to bail. Maybe 50 - 100 pips in a flash, and then lookout below. Buy the rumor, sell the fact.


Aside from sovereign bank buying to punish the shorts the last week or so, can anybody seriously make the case for a long EUR/USD position lasting more than 5 minutes?


Once this farce is over, the real crisis starts, i.e. putting the austerity measures  into force. With strikes, riots, and a lower living standard, anybody seriously think Greece GDP has a snowballs chance in hell of growing? I didn't think so.

Long the 1.4400 / 1.3400 put spread 8 weeks out. May chaos reign.

Alea Iacta Est's picture

This market is JACKED on hopium.

I believe it will SOAR tomorrow, but of course it is empty air beneath it and it will quickly fold back in on itself.

My guess?

Up huge tomorrow, maybe 200-250 points.

Thursday flat.

Friday down the crapper.

Cdad's picture

I believe it will SOAR tomorrow, but of course it is empty air beneath it and it will quickly fold back in on itself.

And if the Greeks set the parliament building on fire?  You think the forward looking discount mechanism known as the market will be balls to the walls bullish that Greece is fixed...again?

And if they don't set the parliament building on fire, but Italian and Irish CDS widens to new all time highs after a yes vote? Then what?

It is the criminal syndicate known as Wall Street has changed the word "investing" to "risk on/risk off."  I would suggest to you this is far from some sort of binary event....but I look forward to your response.

SheepDog-One's picture

Europe on fire...yes all the hot air could possibly cause an updraft for the bubble market zeppelin, but Im not betting on it.

I got a feeling everyone will be surprised bigtime and its the biggest sell the news crash day in memory.

The stupid DOW was at 11,800 only a few days ago, this is all ridiculous.

A Man without Qualities's picture

The Greeks won't set the parliament on fire.  The vast majority of protestors are civil servants, sent out with the approval of their masters (trades unions and politicians) to put pressure on the EU not to be too harsh.  Trades unions know they have to accept, or they default.  A default will annihilate the pension funds, especially the trade union ones that have bought all sorts of crap, so they cannot allow this to happen.  All this posturing is powerful people covering their arses so their individual crimes are not exposed.  Once new austerity measures are passed, everyone will get back to what they do best - working out how to extract the most for least effort from the system and they'll laugh at the stupid Germans who somehow think hard work is the route to affluence.

baby_BLYTHE's picture

I have tried heroin before also, buddy.

In all seriousness. Investing in the stock market is suicide. Just buy Gold and sit this manipulation BS out.

I sleep great at night with my Gold in my closet safe and my Glock on my nightstand.

Once Greece falls, the dominoes will fall unravel quickly. Max Keiser even sees the US as the next disaster after Greece, I agree. This debt crisis is about to blow up in everyone's faces. The politicians will be panicking worse than 2008.

Spitzer's picture

Thats right.

I have 30% gold now, I plan on going 80% in a few days.

baby_BLYTHE's picture

such a huge adjustment in a short period of time. I suggest you upgrade to 50% then wait for another dip, then increase exposure to PMs. 

No matter what the investment, you shouldn't shift around more than 50% of your entire networth into one trade.

Spitzer's picture

These summer prices will be history in 5 months. Even if the COMEX price crashes in another meltdown, bullion banks will close and physical will be unavailable at any price. then its too late

baby_BLYTHE's picture

agreed. I, myself, 80% PMs. I don't trust crash. History is completely against it

Vic Vinegar's picture

You learn something new everyday. 

This is quite true.  Today we learn baby_B now has a "glock".

Do you keep that thing closer to your tampons or your makeup, baby?

Does Peter Schiff make you wet? 

If I learn the answer to that question tomorrow (along with the results of the Greek vote) I will consider it a good day...I never look for much out of Wednesdays.

Vic Vinegar's picture

Somebody flagged this as junk so I take it as license to post this:

> You do realize we live in a world where the government pays people to stop the truth from spreading via the internet, right?  Truth is stranger than fiction.

> Once you realize that, regardless of whether you think baby_B, Spitzer (or Vic Vinegar) is a government employee, you must realize the good guys have a 0.0% chance of winning.

So I say have fun playing the markets, as corrupt as they are.  At least it's a way to pass the time.



Vic Vinegar's picture

Xtra junks just means I get to riff until I fall asleep.  Show yourself, fruitie.

Comment taken from a worthless Stone Street Advisors article today:

Some of us are doomers because we see a one world gov’t, cashless society, 500 million people on the planet future ahead of us and we missed the runup in LULU. :-)

For many a dark hour I have been thinking about the duality in that sentence above.  Ultimately all we can do is live the golden rule in our personal lives.  For myself, I’ll keep on trading stocks in this crime-scene of a market in the meantime…I’ve gambled in filthier, more depraved places before anyway.

Thanks Zero Hedge for the greater understanding of the world and for the therapy. 

Vic Vinegar's picture

Since I gotta roll now, let's leave it at this:

  • Blythe, I'm gonna be on you like white on rice, like ltjohnrichard on RobotTrader. 
  • 9/11 was indeed an inside job.  Did baby_B tell you that or talk to you about her glock?
  • Who gives a fuck about the two comments above...most of us are just  gamblers at heart. Myself, I'm pissed about missing out on LULU.  I'm man enough to admit when I'm wrong.




JLee2027's picture

Not this time, but sometime soon people will stand and refuse the bankers.