This is from the latest note from UBS floor guy Art Cashin. It’s a very good summation on what’s recently happened in Greece, and how US markets are viewing the situation.
Greek Leader Lobs A Verbal Grenade Sending Markets Aspin – Tuesday’s trading started rather calmly in Europe. Markets were mixed and players assumed the Greek minuet would continue to play out over the next week or so.
Antonio Samaras, head of the New Democracy party had announced Monday that he was unable to form a coalition government.
That led the Greek president to pass the organising baton to the leaders of the party getting the second most votes, Alexis Tsipras of Syriza, a far left group.
Shortly after European markets opened, Tsipras stirred the pot a bit by claiming he would nationalize the banks. Markets nervously dipped a bit.
Then, around 8:15 (EDT), he dropped the other shoe. (Actually, it seemed like he dropped Imelda Marcos’s closet.)
He called the austerity plan “barbarous”. He said he would not accept it and called upon leaders of the other parties to renounce it in writing.
That prompted Mr. Samaras to reject the call saying “I will not put my signature to the destruction of Greece.”
Now the fat was in the fire. A coalition government seemed highly unlikely. Markets began to spiral downward.
U.S. stocks opened down and tried to circle the wagons. They managed to fend off panic for the first half hour.
Then a member of the ECB framed the earlier Greek package as a take it or leave it proposal.
Jorg Asmussen told the German media – “Greece needs to be aware that there is no alternative to the agreed reform program if it wants to remain a member of the Eurozone.”
European markets kept moving lower, dragging U.S. markets behind them. Shortly before Europe closed, the Dow was down almost 200 points.
After the European close, stocks tried to rally but were seemingly held back by the 1356/1359 level in the S&P. That broken support band now provided resistance.
The same area would restrain a mid-day rally attempt.
Shortly before 3:00, a third rally attempt punched through and that seemed to panic buyers who had been waiting around to pick up bargains, if the market really cracked. Now, with just over an hour to go, they scrambled to catch up.
Once again there was a “final fifteen” scramble as a bit more than 100 million shares crossed the tape between 3:45 and the initial ring of the bell.
The post-mortem decanting session centered on the heavy selling early in the session. The consensus was that it looked like Europeans might be selling in New York to raise cash that’s tougher to raise in Europe. When you can’t see what you want to sell, you see whatever you can.