Sunday, June 17, 2012

6/17/12: Greek Election Results => Summer Rebound Likely to Continue

Greek election results look good.  For more details on Greece, check out this recent Bloomberg article.
The projections showed New Democracy winning 29.5 percent and 128 seats. The radical left Syriza party, which has vowed to repeal Greece's international bailout deal, was expected to come in second with 27.1 percent and 72 seats. PASOK trails with 12.3 percent and 33 seats.  Reuters
The euro rose to around $1.2730 according to Reuters data in early Australasian Monday trade, from around $1.2655 late in New York on Friday. It hit its strongest since May 22 according to Reuters charts.  Reuters
The Federal Reserve is due to release a policy statement on Wednesday at the end of its two-day meeting, and the steady flow of sovereign debt warnings and downgrades is likely to continue.

In another sign of investor nervousness, the CBOE Volatility index (^VIX), Wall Street's fear gauge, was up for much of Friday even as stocks rose, although the VIX closed lower. Stocks and the VIX typically have an inverse relationship.

Many investors have been trying to prepare for the worst.

"People have been hedging their positions aggressively over the past two weeks heading into this weekend," said Alec Levine, a derivatives strategist at Newedge Group SA in New York.  Reuters
  • All of the hedging activity - shorting stocks, buying puts, buying treasuries & US Dollar - detailed above should enable stocks to climb higher from here.
  • Positive outcome in Europe, Greece + exhausted fear trade = higher equity prices.
BAC and the other big banks will likely benefit from this news.  I think BAC could possibly break above $8.00 this week, 6/18 to 6/22/12.  For now, let's see how futures trade this evening and throughout the night.  Around 4:00 AM ET, I should have a better feel for the direction that the major indexes will take.  I view BAC as a long-term investment.  If you buy BAC, be patient.  You'll thank me later.

Importantly, the FOMC (Fed) meets this week.   Due to the piss poor jobs numbers in May 2012, I think it's fair to say that QE3 is on the table.  In fact, I'd say everything is on the table right now.  Regulators, worldwide, are likely to do everything in their power to heat up, possibly overheat, their respective economies. 

Look for positive GDP growth to reemerge in the US during Q3 2012.  I think building LONG-TERM positions in TBT will prove to be a smart bet later on down the road.   Alternative: SBND

I own various long-term positions in BAC and TBT.

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