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Stretching Probabilities

Despite suspecting that the markets were not in danger of imminent collapse  .....
I have paused (several times) to post in the past week or so.

Price action is price action - it is all we should respect - but it has done nothing to displace the 'corrective' look of the charts.

And whilst nothing is certain .... from an (Irish) Euro-centric perspective the bullish probabilities are looking VERY stretched.

The post-Stark Euro realities are grim. And whatever the market apparently 'believes' ...... unintended consequences are impossible to price.

Very briefly - and please tell me where I'm incorrect - the following realities loom on the immediate horizon: 

The Greeks will squeak through this 'review' but some form of default is all but inevitable - I'd suspect there is a strong risk this will occur BEFORE the October (isn't it always this time of year?) installment is actually paid.

There will be no EuroBond - read the German Constitutional Court's judgement.

And as above - outside the possibility of some hard core residual - full fiscal union is not going to happen. Even in the most optimistic scenario the necessary referendums will never pass.

The ECB has been left as the 'buyer of last resort' but German dissent is a serious constraint on the necessary scale of its operations.

Therefore ......

The charts suggest that the Euro looks set to work its way towards 1.30.

And the SPX - the simplest 'risk' barometer - might stretch the bear flag thesis towards 1250 with some a 'twist' from the FOMC, but the probabilities have strongly turned towards (at a minimum) retesting the August lows.