Below is the interesting view on the EURO currency. The implication of EURO crush is strength of the $US which in return means lower commodity prices including OIL.
Good for the economy but not so good for the energy sector.
The stock market rallied Tuesday after Reuters reported that Germany would finance a bailout for Greece. The market was setup for a rally which was due late Tuesday, so the news report, which was later repudiated by Germany, allowed most of the pent-up oversold energy to dissipate. At this point, we don't have an oversold condition even though the cycle is bottoming, so it's impossible to say that we are going to get a rally on this cycle.
The rally is a countertrend move and a sigh of relief as the market now assumes that all of the PIGS (Greece, Portugal, Spain and Italy) will be bailed out. Of course, the market is ignoring the fact that we are again making the same mistake by papering over a debt bubble. Apparently, the success of the last round of bailouts has convinced the market that Judgement Day can be postponed inevitably.
The market could hang up for a couple of days, but it will depend entirely upon the action in the Euro. The Euro rallied on the bailout news today, which is just the opposite of how you would think it would react. There will have to be trillions in Euros printed to bailout the PIGS and increased supply should mean a lower Euro. But, this is just another instance which proves the general rule that the markets are irrational.
The rally in the Euro, just as the other rallies in the Euro, presents yet another selling opportunity for investors to add to short positions in the Euro (equivalently, bullish positions in the EUO can be bought on this dip)
