Stocks soar, ignore Greece, Charleston slaughter and reality

Irrational exuberance returned to Wall Street Thursday after the Federal Reserve chose to keep a lid on interest rates, at least for now. But trouble still brews in the background.

Hellenic Parliament.
The Hellenic Parliament from a high vantage point. (Credit: Gerard McGovern via Flickr, CC 2.0)

WASHINGTON, June 18, 2015 – After Wednesday afternoon’s somewhat surprising rally, which launched just prior to the Federal Reserve Open Market Committee (FOMC) minutes release, U.S. stocks remain on a tear at Thursday noon.

The Dow Jones Industrials are levitating around +200 points. The broader-based S&P 500 is up over 20, and the tech- and small cap-heavy NASDAQ is soaring, having finally blown through its all-time intra-day high of 5,132.52, which it hit on March 10, 2000, even as the dot-bomb tech bubble was about to deflate, big time. It currently stands at 5133.21, up over 68 points on the day.

We’ll enjoy the fun while it lasts. Some of today’s move is due to short-term oversold conditions. Some of it is due to irrational exuberance over the Fed’s current inability to raise interest rates. And all of it ignores the ongoing financial train wreck building in Greece and the socially destabilizing tragedy that has been unfolding in Charleston, S.C., since Thursday morning.

According to reports reprinted in ZeroHedge, Greek’s current Communist Prime Minister Alexis

Tsipras already said he wouldn’t hesitate to reject the final deal offered by the Eurogroup and now even          the central bank in Athens has released a remarkable statement.

It says that it’s unthinkable Greece will stay in the European Union if no new agreement can be reached. That’s an obvious conclusion, but it’s surprising to see an official institution of Greece openly talk about a Grexit.

That’s pretty forthright, all right, although it’s tempered somewhat by the fact that the central bank is currently headed by one of Tsipras’ political opponents. Nonetheless, the truth is the truth, and the central bank of Greece has just laid it on the line. Not that it will influence Tsipras one iota.

The BBC notes that there are precisely three viable options remaining for the Greek government and the Eurozone:

  • Option 1: No deal: Greece defaults on IMF and ECB repayments; ECB pulls plug on emergency bank assistance leading to run on Greek banks, capital controls and potential Grexit [Greek exit from the euro]
  • Option 2: Greece agrees reform deal with creditors at last minute and avoids default, staying in euro
  • Option 3: No deal reached but both sides paper over cracks and Greece stays in euro for now

Things are rapidly coming to a head in the Eurozone, and the outcome is in serious doubt, as is the over-all economic impact of a Grexit, which could hit the U.S. markets harder than anyone anticipates.

This whole farce—a socialist continent at odds with an even more socialist member nation–has been extraordinarily irritating to traders on this side of the Atlantic. But there you have it. It’s what happens a Western civilization, or any civilization, throws its political and fiscal traditions into the wind.

But again, Wall Street is ignoring the drumbeats of doom today. Likewise, it’s ignoring the socio-political tragedy playing out in Charleston this morning.

According to reliable news reports coming out of this quintessentially Old South city, a 21-year-old white gunman entered a black church and proceeded to blow away nine of its members, loading, reloading and shooting them in cold blood before taking off.

The city is in shock. Cops are in pursuit of the suspect as of this writing. And very likely, the press corps, which has always detested the South, will be hyping up the racial aspect of this attack, which indeed the local police have already labeled a hate crime, given the diatribe delivered by the suspect as he waged his bizarre and tragic vendetta against innocent U.S. citizens.

Count on Al Sharpton to be on the next flight to Charleston to stir up the mobs, and count on the Obama administration to heat up America’s racial cauldron yet again, making things worse and worse, using racial tragedy to drum up votes.

Whatever your opinion on this unfolding tragedy, if developments surge out of hand, look for a nasty weekend in Charleston and a negative impact on markets over at least the next few trading days.

With all this going on in background, it remains uncertain how long the markets will remain impervious. But right now, stocks are working off a short-term oversold situation, heading right into tomorrow, Friday. Yes, it’s options-expiration time again, and markets often stay positive as option traders and option hunters close out their bets and hunt down exposed strike-prices.

But if things continue to go badly in Greece and Charleston over the weekend, Monday could witness the resumption of this week’s earlier market slide. Plus, interest-sensitive stocks and ETFs continue to trend down today vs. the rest of the market’s might, indicating that the bond vigilantes intend for the Fed to raise those interest rates earlier rather than later.

In the meantime, let’s all hope and pray that the cops nab this young alleged perp ASAP and bring him to justice.

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