Welcome to the first black swan of 2013!
You couldn’t mistake the meaning of the cries of topless female protesters as they flung themselves at police guarding Italian polling stations on Monday. Basta! Basta! Enough! Enough! The purpose of their demonstration was visibly scrawled in large letters across their nubile bodies in black ink for all to see. Mille grazie Profesoressa Francesca for being my Rosetta Stone!
Global equity investors could well be screaming enough, enough as well. Right when it became clear that the Italian election was not going according to script, the major indexes rolled over from substantial gains to even more impressive losses. The Volatility Index (VIX) blasted 35% to the upside, the biggest move since November, 2011, the last time the Land of Julius Caesar threatened a meltdown. The Italian Index ETF (EWI) really got decimated, posting an intraday fall of 18%, while the Euro (FXE), (EUO) took a two and a half cent dive against the greenback.
Up until today, the smart money was betting on a win by socialist Pier Luigi Bersani and some continuation of the recent reformist policies. What we got was a much stronger than expected showing by Silvio Berlusconi, who is using his billions of Euros to get elected to avoid going to prison. His platform is to undo all of the reforms of recent years, and basically send Europe back to the crisis days of 2010, when the European currency traded as low as the $1.17 handle. Note to self: the smart money isn’t always right.
Of course, I have been warning anyone who would listen that something like this was headed our way (click here for “Is the Party Over” ). I was even so precise in my predictions that I said the trigger might come from the next leg of the European financial crisis.
To see the exact levels where major support kicks in on the charts for this selloff, please follow the link above. For the Legions who follow my market beating Trade Alert Service, take solace in the fact that our entire portfolio expires in just 13 trading days, and these levels only need to hold until then. After that, we want everything to go to zero, where we can buy them cheap.
Long Time No See