The “PIGS” are on Wing….Part 1.5 of 2

by Dan July 11, 2011 9:22 am • Commentary

Today’s action could be a little moment of truth for the strength of the rally off of the recent bottom…..Many were left scratching their heads as much of the early start to the rally was spurred by an averted Greek default…..well, as you might have expected there is no clear resolution to the Greek situation and now we are getting around to the rest of the “PIGS”.  The only place in Europe where the bubbly will be flowing this summer may be St. Tropez (where it is always flowing).  

Friday’s sell-off on our jobs data was fairly muted, and in some ways, a bit impressive when you consider how horrific the number was and what it means for our recovery.  U.S. corporate earnings will hold the key at this point, if we see some disappointments out of names in sectors other than banks than we could see a retracement of at-least half of the recent gains and possibly a retest of the June lows.

I remain skeptical of the strength of recovery…… and housing have been and remain the key, and neither have bottomed.  I am hard pressed to think that companies stick their necks out with overly aggressive guidance for Q3 while so much uncertainty remains with QE2 over and the fears of a double dip still very prevalent.

S&P futures are down 1.4% as of 9:15am on concerns regarding Italy’s financial health, and the Euro is getting slammed, back to the lowest levels since late May and approaching a crucial support level of 140.  A break below this level could spell an unwind and some to re-think where the “flight to quality trade” will be.

[caption id="attachment_3167" align="aligncenter" width="300" caption="1 Yr Euro vs $ chart Provided by Bloomberg"][/caption]


I have a FXE put fly that expires on Friday’s expiration that is very much in play (read here). Management of this trade will be important and check back as I will look to either take profits and/or roll prior to expiration.