INTELLIGENCE: IMPACT OF POTENTIAL GREECE EXIT ON GOLD, SILVER, BONDS AND STOCKS $EUFN $GLD $HEDJ $QQQ $SLV $SPY $SWZ $TBF $TBT $TLT $ZSL #GREXIT #GREECE $NBG $GREK

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INTELLIGENCE: IMPACT OF POTENTIAL GREECE EXIT ON GOLD, SILVER, BONDS AND STOCKS $EUFN $GLD $HEDJ $QQQ $SLV $SPY $SWZ $TBF $TBT $TLT $ZSL

This post was just published on ZYX Global Multi-Asset Allocation Alert.

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These calls are only for those investors who do not mind trading a little bit around the edges for the short-term to increase returns and reduce risk.

Those mostly focused on the long-term may ignore these signals.

Greece

A Greek default is officially on the table as IMF walks out of negotiations. Yield differential between German bunds and Spanish 10 year bono is expanding.  Yields are also rising in Portugal and Italy.

In Greek talks both sides have drawn red lines.  The problem is that the two red lines are far apart.  Thursday will be a crucial day on Greece.

Tsipras speaking in front of Greek lawmakers showed no sign of backing down and accused its creditors of using tactics akin to financial asphyxiation. However the markets latched on to a very small part of his speech that was conciliatory.

Under consideration is a Eurozone summit if ministers fail to reach a resolution on Thursday.

Greek central bank is warning that a default and euro exit will be painful.

The Fed

The Fed is facing a high wire act in view of conflicting data.  The economy in the U. S. is getting stronger but the international economy is getting weaker.  There are also significant concerns over Greece. The Fed will announce its policy statement at 2:00 pm ET followed by a press conference at 2:30.

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There is not likely to be any material change in interest rates today.  Most likely timing for an interest rate increase is September or December.

Effect Of Grexit On Gold And Silver

If Greece exits Eurozone, there will be a push and pull on gold and silver. On one hand, Grexit will create uncertainty leading to buying in gold and silver.  On the other hand, the U. S. dollar will strengthen, a strong dollar is number one enemy of gold and silver.

Which ever side wins the initial battle will gain the favor of algorithms run by machines to exaggerate the move.

Any such move is likely to be temporary and reverse in due course.

The inverse ETF ZSL in the portfolio goes up when silver falls.

The Effect Of Grexit On European Financial Institutions

In the portfolio, there is an ETF EUFN that represents European financial institutions. On a Grexit, there may be an initial spike down in EUFN but European financial institutions are now pretty well insulated from Greece.  any dip in EUFN will be a buying opportunity.

Effect Of Grexit On TBF

As money rushes into the U. S. dollar, interest rates are likely to fall and TBF will fall.  However,  the Fed is set on increasing rates in September or December of this year.   Therefore any down move in interest rates is likely to be temporary and reverse in due course.

TBF is an inverse ETF that goes up when interest rates go up and vise versa.

What To Do Now?  

It is worth repeating,

These calls are only for those investors who do not mind trading a little bit around the edges for the short-term to increase returns and reduce risk.

Those mostly focused on the long-term may ignore these signals.

Those wanting to take a short-term action may consider the following:

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Reduce ZSL in the Low Risk Portfolio from 3% to 1% and in the Lower Risk Portfolio from 2% to 1%.

Reduce TBF from 6% to 4% in both portfolios

Reduce EUFN from 4% to 2% in both portfolios.  Previously on Greek concerns EUFN was reduced from 7% to 4%.  Also from a previous post,

If the Greece situation is resolved, aggressively buy EUFN within the buy zone.  Also at that time the allocation in both portfolios to EUFN will become 10%.

Previously profits have been taken on Hedged European ETF HEDJ and Switzerland ETF SWZ.

Consider continuing to hold the remaining positions. 

As a reminder, all further buying has been suspended even if specific ETFs dip into the buy zones without a new post on the Real Time Feed.

It is important to take note of better than 50% probability that still exists that the can will be kicked down the road on Greece.  There also is an emerging scenario under which

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