The major indexes (US & Abroad) sold-off this week based on fear of Greece “Contagion” spinning out of control.
We believe the sell-offs have not finished and are “watching” the market for a possible entry point.
Other negative events that occurred this week:
1. China raised rates to clamp down on real estate prices and manufacturing slowed.
2. Greek parliament voted through the auterity measure; Riots broke out that resulted in the death of 3 bankers. The Greek market continued selling pick up momentum as the ECB refused to buy Greek Bonds;
3. Gulf of Mexico oil spill worsened — Congress talked about raising the cap on damages.
4. EU at risk from the Greece “Contagion” — costs to insure Portugal & Spain spiked higher this week as the EUR hits 1-year low vs USD. This problem seems to resemble the Lehman problem that led to its insolvency in the fall of 2008;
5. VIX spiked upward — spiked to 42 from the low of 15.5 (as noted on April 16 Blog)
6. Australia imposed a “profit” tax of 40% to “resource” companies
7. UK election resulted in a Conservative win with a majority of the votes.
8. NASDAQ corrected 10%+ for the week (from the high on Apr 23).

Next Week
1. G-7 conference call announcement about the “Greece Contagion”

Below is the chart of the S&P500; We are expecting a re-test of 1,095 next week.