Greece is on the other end other stick. They are certainly no young pup as anger boils over in Europe. Today I saw on Twitter pictures of the swastika being hoisted over the Acropolis. One is a giant, the other a dwarf in comparison. One is an ancient democracy with a financial system created out of the ruins of the 2nd World War, the other barely a rebellious teen. I’ll let you decide which country Arnold is and which one Danny DeVito is. I’ve made my case but it seems like they take turns causing trouble. Make no mistake, one will be affecting the other and they are twin problems to a world that's only getting new problems by the week. So, I do not believe the Chinese crash is over. But, you can build a case the first phase of it is done.

Last week was very strange because I looked for the initial phase of the drop to materialize with the "No" vote. You’ll recall the first phase of the drop in 2011 ended on the Japanese turmoil of earthquake, tsunami and nuclear meltdown. Here we had a Greek banking holiday and election. But the problem materialized on Tuesday night that while markets were down, the calculations were not there and the fear on the VIX certainly wasn’t. In our business we look for the proverbial blood in the streets, but there wasn’t any. It’s one of the strangest set of market readings I’ve seen. This came after the markets left a big lower tail for last Tuesday. Then China hit for its final push lower and that was likely the other shoe dropping. Since events come in threes that might have been the first one.

Watching the China debacle, I was so curious to see how our markets would respond. To be sure, they dropped but none of us were ready for what happened next. When I got up near the left coast it was already reported that United Airlines was grounded with some technical glitch. Then suddenly there was a glitch on the floor of the NYSE yet trading continued. It was all so surreal. I’m sure some conspiracy theorists were out but our markets were only down, not out. If someone was trying to prevent a crash by inducing a problem at the NYSE that didn’t work because we saw the true intent of the market was to reflect on China, not join them. At least not yet.

But that doesn’t rule out the very real possibility of a cyber-attack of some sort. Count me in as one believing what we witnessed last Wednesday is a potential test run for a bigger hack. But that’s just me. But here’s the point. Sentiment got really bad. I even heard some market pundits referring to the NYSE as a dinosaur with this event suggesting floor specialists become extinct. That was the type of negative emotion lacking on Monday and Tuesday. Consequently there is a good possibility we now have the first phase of whatever is developing being complete.

As you can see from the chart of the VIX it actually hit 20, and these days qualifies as a miracle. Look at what it took for the VIX to get back to 20. We needed Julius and Vincent to get us there. But like the Chinese, we don’t learn from history--by the end of the week fear subsided and the VIX was back in the 16 handle. So where do we go from here? I’m looking for a continuation of this new bounce that developed late last week, but you know the drill. The bull is old, tired and riddled with technical damage. I look for a continuation of that forecast to continue and we’ll just have to see what other divergences develop.