China Commerce Minister Yao Jin: China is sending a trade delegation to the US planning to purchase goods and services in the energy and technology sectors as a peace offering to strengthen economic ties. -China Daily

The Euro is trading at the important 1.2 level. The final defense of the euro (the buyer of last resort) is the fed–through their swap lines. There is a massive amount of liqudity due in the next month, which will strain the limits of the fed itself. The Euro faces a scenario best described by the prophetic words of Led Zeppelin.

“If it keeps on rainin levee’s gonna break.”

Secular Outlook by Mohamed El-Erian of PIMCO.

“Last weekend’s drama in Europe is yet another illustration of this phenomenon. Policymakers are now forcefully using the balance sheets of the EU (ultimately Germany) and ECB to compensate for the debt excesses in the periphery (particularly Greece) and the related overexposure of European banks.”

Meanwhile, back at the factory, the accounts are repositioned and the only stocks we own are gold and silver names. We also own various calls on gold and silver and a fair amount of puts on the euro.

I previously wrote of the S&P 500 holding to it’s pattern of higher lows. Stocks have recovered off their lows, but have come upon resistance, which at one time was support. Given this picture, I am looking to short the S&P rather than be long it.

Trader Art - Support Becomes Resistance Oil on Canvas

Greece

Remember this about Greece: they cannot be bailed out by borrowing more. You cannot borrow your way out of too much borrowing. It does not work. Once debt levels reach a tipping point, there is no way out except default. Which is what Greece will be forced to do through a forced restructuring.

Big Trade

Given the crosscurrents, we are looking at a trade that could be bigger than the crash of 2008.

Hold on. The big trades are always full of twists and turns.

German Finance Minister Schäuble was just on the wire stating that ratings agencies should not be taken too seriously by market players.

Mr. Schäuble deserves honorable mention for coming out with this. After all, it is glaringly obvious that ratings agencies are bought and sold as easily as hookers in Amsterdam. But at least someone in power actually admitted it!

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Location update: A small hiatus had me at a remote location.

Now I’m back. Back in the New York Groove.

Wherever I am, I am a deflection. And you cannot kill a deflection.

Because the beat goes on.