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business newsMonday Morning Quarterback: Three Blind Mice
Investors are ready for a fresh five-session set.
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-- The Grateful Dead
As world watchers breathed a collective sigh of relief that Greece didn't implode just yet—staving off what is, most likely, a domino effect that would quickly arrive at our front door—three blind mice (as in, unforeseeable risk catalysts) emerged on our radar.
The first is Greece itself; while the headlines suggest that Greece will avoid default through the formation of a national unity government (which will presumably secure the next tranche of financing), the political climate is far from stable. Further, the specter of a splintered EU—which was until last week deemed unthinkable by the powers that be—has opened a Pandora's Box of potential problems. We used those exact words on Friday and Morgan Stanley posited precisely the same vernacular yesterday.
Which leads us to Italy; we alluded to this being the next big issue for the European Union—Fil Zucchi offered on Friday’s Buzz & Banter that "something spooky" was afoot in his homeland—and walked in this morning to find Prime Minister Silvio Berlusconi fighting for his political life and Italian bond yields north of 7%. It's quite similar to what we saw in Greece—austerity measures are needed to qualify for aid—but it's an entirely different culture. While Greeks like to leisurely lounge and retire early, Italians are known for their knack for the fancy, as anyone who dabbles in shoes, food, or fine wines might attest.
And there's the structural stateside situation, courtesy of the fallout from MF Global (MF). There was considerable chatter Friday night that the CME was raising maintenance margin—which could have triggered margin calls and forced selling—but the CME (CME) turned around this morning and lowered margin requirements to "ease the MF Global account shift." While the rest of the world reacts to what the actions were, I'll remind ye faithful to ask "why" and remember that some of the most important catalysts are often invisible.
There's more, of course—little things like Russia threatening Israel with "unpredictable consequences" if they attack Iran's nuclear facilities—but that's for another day when we have more time. From now till then, market practitioners will be watching S&P 1220 (the biggie) and S&P 1180 (the last line of defense) on the downside and BKX 40 (it's worked like a charm" on the upside. Good luck today.
R.P.
Twitter: @todd_harrison
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.
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