E-Mini S&P 500: Nightmare on Wall Street!
E-Mini SP 500: Nightmare on Wall Street!
The E-Mini SP 500 dipped further as investors bought Treasuries and German Bunds as safe-haven vehicles in response to the uncertainty over the future of the Euro Zone and the affects globally! Wall Street was really expecting a bit of a bounce on the Facebook IPO debut. The Nasdaq Stock Market, which lists the Facebook IPO encountered reporting problems in their electronic software making investors waiting over two hours for their fills. In the first minute of trading, 83 million Facebook shares were entered, while the overall volume was over 515 million shares. Expectations are for Facebook’s IPO to exceed $18 billion, but at the end of the session, the stock traded down to practically where it opened. After all the hype, it was a bit of a disappointment. Of course, in futures trading years ago before electronic trading, traders could wait in some cases days before knowing their positions. Expectations in today’s markets seem reliant on instant gratification. Nothing seems to counter the potential exit of Greece and the Spanish banking crisis in the marketplace. The gloomier the global economy, the more anticipation for another round of cheap loans through the European Central Bank (ECB) and perhaps more potential for QE3 by the US Federal Reserve!
The Greek election of May 6th failed to provide a government allowing Greece to assign a judge to act as an intermediate until the June 17th elections. It is feared that the leftist may hold the majority vote. If so, the indebted country may decide to leave the Euro Zone creating a spiral effect of downgrades to the other European Union (EU) countries as Fitch’s credit rating agency has warned. The major keepers of the Greek debt are the International Monetary Fund (IMF), the EU and the (ECB)! The creditors may hold around $200 billion euros of Greek debt. This could virtually dry up funding for other indebted countries in the future. The IMF and ECB may need to approach other governments to solicit funding to recapitalize. The ECB would be pressured to help stabilize the region with possibly Germany as the strongest nation taking the largest loss. The European Financial Stability Facility which should expire in the next couple of months may be called upon to facilitate the funding of Greece with the exit. The problem perhaps being that the leftist party leader believes that the rescue money will come even without the austerity reforms. Why trim the budget when you can simply acquire more funding? Greece also may run out of money next month and without any government in place to negotiate any rescue funds, the country may actually feel the effects of a severe recession. Article 50 of the Lisbon Treaty deals with any withdrawals from the EU specifying that an agreement with the other EU members must be drawn up to be approved by the majority and also by the European Parliament. A manageable exit of Greece is not terribly frightening in itself, it is the contagion effects and the fragile economies of Spain and Italy that have the EU leaders trying to head off the problem. As of late, the surveys are showing the vote to have shifted toward a bailout and austerity program. The European Union does not want Greece to leave the EU. The leaders are still unclear of the various functions of the European Stability Mechanism (ESM) along with the other funds. The European Stability Mechanism (ESM) could sell Eurobonds and the EU could expand talks on the Growth Pact. On Monday, Greek customers withdrew over $700 million euros from the Greek banks in anticipation of a potential return to the Drachma. The Greek bank deposits have dropped by about 30 % in the last two years. Some Greek banks cannot fund themselves at the ECB, putting them in line for the Emergency Liquidity Assistance (ELA) from the Bank of Greece. The homeless rate in Greece is increasing and the soup kitchens are full perhaps leaving the people of Greece in desperate circumstances that can only lead to further protests and dissention. Greece does a tourist trade, but that may be affected by the state of their economy. Greece imports about 40 % of its food products, energies and pharmacy products. Without production of some sort, it is difficult to foresee a bright future for the country unless somehow global mega companies could find some benefit to move operations to the country. German suppliers have even commented that they may not extend credit to Greece for goods as the insurers may not cover the shipments. Germany’s PMI for May is at 47.0 which is reflected as a contracting economy. Being one of the strongest nations in the Euro Zone, they have had to shoulder some of the debt. Even the strongest of nations may be subject to the contagion effects of a faltering nation. Spain’s bond auction generated a healthy demand, but at a cost with the yields of the ten-year paper rising above 6 %. Bankia had rumored outflows of over a billion euros last week as customers became nervous over the potential exit of Greece from the Euro Zone. The Bankia shares were down 14 % on the sentiment. Spain intends to make reforms to their annual budget with cuts up to $18 billion euros, but many Euro leaders may feel the target a bit lofty in light of the contracting economy. Spain’s economy is said to have contracted by 0.3 % in the first quarter. It is doubtful that a resolve is on the horizon for now and without that confidence in government and the economy, the E-Mini SP 500 could continue its slide potentially to $1242.50 over time. That would be about a 50 % retracement from October of 2011 to the highs of March 2012. Any potential ECB intervention and/or any US Fed action would of course buoy the indices.
Iran is still in talks with the European Union Foreign Policy Chief Catherine Ashton who hopes that the nuclear research program is at the beginning of the end! They meet in Bagdad on May 23rd to resume negotiations. Iran is hoping to reduce the sanctions placed on it by the US and the EU. The financial constraints have forced Iranian business to be bartered in Gold and Rupees as the Iranian banks have even been banned from SWIFT transactions. The International Atomic Energy Agency is attempted to gain access to Parchin, the nuclear complex southeast of Tehran. The agency indicated in one report that Iran had built a large object according to satellite images that is suspect to high explosives. More recently, the IAEA reports that satellite imagery has picked up vehicles near the site and a stream of water flowing from the building. It is thought that Iran is detaining the talks in order to clean-up the site. The energies have come down in price as a result of increased production by Saudi Arabia and some global growth slowdowns. The Middle-east is still vulnerable to conflict until a resolution has been reached. According to Israel and the US, military action is still a possibility! With that in mind, Russian Prime Minister Dmitry Medvedev has stated his opposition to any Western intervention with Iran. Russia has vehemently stated that to attack Iran is to attack Russia. The 38th G8 summit is being held in Camp David, Maryland on May 18th and 19th, 2012. President Obama wants to meet energy with energy as he is attempting to convince the G8 that reserves should be released from the Strategic Oil Reserves to make the energy prices come down and further pressure Iran to allow the investigations. Last year he released 30 million barrels of the reserve to counter any higher oil prices that could benefit Iran. So far the used reserves have not been replaced. A regional nuclear war would be a true shock to the US as the talks themselves are nerve wracking!
On the stock side: JP Morgan Chase and Co. (JPM) was down 1.30 % to $33.48. Citigroup Inc. (C) was down 1.51 % to $25.98. Bank of America (BAC) was up 0.57 % to $7.01. Alcoa Inc. (AA) was down 0.82 % to $8.43. Boeing Co. (BA) was down 0.83 % to $69.10. Caterpillar Inc. (CAT) was up 1.00 % to $88.60. General Electric Co. (GE) was up 0.37 % to $18.94. Halliburton Co. (HAL) was down 0.23 % to $29.98. Hewlett Packard Co. (HPQ) was down 2.72 % to $21.41. SPDR Select Sector Fund – Financial (XLF) was down 1.14 % to $13.76.
Monday, we have no major US economic news due out!
E- Mini SP 500 Chart.
Monday, what to expect! We maintain a bearish bias unless the E-Mini SP 500 penetrates $1365.00! Monday, we anticipate an inside to lower day! Today’s range was $1310.50 - $1289.75. The market settled at $1290.75. Our comfort zone or point of control for this market appears to be $1302.00. Our anticipated potential range for Monday’s trading could be $1307.50 – $1282.50.
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Article Source: http://www.insidefutures.com/article/648537/E-Mini%20S&P%20500:%20Nightmare%20on%20Wall%20Street!.html
