Greek Stock Tragedy Unfolded According To Script

On October 8, we posted “Another Tragedy Unfolding In Greek Stocks”, noting a significant breakdown in the Athens Stock Exchange Composite. After having been rejected at the serious long-term resistance we noted in May, in our view, the October breakdown of the index’s descending triangle forewarned of steeper declines. A technical measurement of the descending triangle resulted in a downside target in the 700’s, near the July 2013 lows. That constituted at least a 20% drop in the Athex Composite. Today, amid the Greek parliamentary proceedings, the Index dropped to an intraday low of 756.80, exactly 25% below its level on October 8.

Interestingly, the Athex Composite recovered quite a bit of its losses by the end of the day to “magically” close at 819.81. The significance of that level is that it represents almost the exact (818) 61.8% Fibonacci Retracement of the market’s 2012 to 2014 rally. We have mentioned Fibonacci analysis often in our posts and while it may be widely rejected by the public as “voo-doo”, one thing should be understood: many players managing major sums of money utilize Fibonacci levels, so whether self-fulfilling or “voo-doo” or whatever, it is relevant.

That said, seeing as though the “700’s” target has been achieved and the Athex stopped at the precise and key 61.8% Fibonacci Retracement of the 2012-2014 rally as well as the summer 2013 lows, perhaps the next surprise in Greece is to the upside. Should the present levels be broken, the 2012 20-year lows are certainly in reach, and probably pretty quickly. That certainly appears to be where the market is headed, eventually. However, the current spot certainly is a tough risk:reward area to press shorts. The market could conceivably bounce 30% from this level, and still be in a bearish posture.

As the chart still suggests we be negative on the Greek stock market on a longer-term basis, we’re not looking to catch a knife. Therefore, we’ll wait for a better set-up on the downside. For now, consider this act of the Greek tragedy in the books with the 700’s target having been achieved.

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