Market Forecast: Feb. 21, 2012 (SPY, USO, GLD, UUP, VGK)

Markets are not impressed with Greek deal, looking weak going into U.S. opening after long holiday weekend.

Major global markets and ETFs seemed “underwhelmed” over the new settlement of Greece's debt and major efforts to avoid default.

The agreement was announced in the wee hours of the morning after a marathon session in Brussels aimed at giving private bondholders a “haircut” without triggering Credit Default Swaps or otherwise damaging an already frail financial system.

In overnight trading, stocks mostly declined in Asia with the Nikkei down 0.23%, the Topix down 0.33% and the Hang Seng rising 0.25%.

In Europe, major indexes were mostly down with the STOXX 50 losing 0.8%, the FTSE losing 0.44% and the DAX losing 0.83%.

Expect to see significant action in Tuesday's morning trade on Wall Street in Vanguard MSCI European Index VGK as U.S. markets register their first reaction to the latest round of settlement aimed at saving the crippled nation.

Other major markets also reacted to the news on Greece with gold GLD adding more than 1%, oil USO gaining 1.4% while the U.S. Dollar UUP declined 0.24%.

The S&P 500 SPY was closed, of course, for the Holiday weekend but now appears poised to move slightly higher at the U.S. open on Tuesday.

Almost as soon as the multi-billion Euro dollar agreement was reached, skepticism and doubts were being expressed over whether the austerity program was going to be honored and whether it would be enough to solve the problem over the long term.  Furthermore, austerity will no doubt extend and deepen the recession already underway in Greece and so make it more likely that more money could be needed somewhere farther down the road.

Beyond Greece lies Portugal and its even larger problems and Italy and Spain could also enter the picture later.

Even before the agreement is approved by the European Union, analysts are suggesting that all this does is buy Greece some time, maybe as little as six months, before the country finds itself at the edge of default yet again.

The negotiations this time around lasted for seven months and again came down to the llth hour as the two sides struggled to find the 130 billion euros needed to make the deal happen.  For now, the March 20th default date appears to have been avoided or at least pushed back, but with a debt load still above 120% of GDP in 2020 (???) many analysts are wondering aloud if this is a legitimate solution or not.

So far the European nations have thrown more than 300 billion Eurodollars at this project and very likely this won't be the last tranche of aid needed to save this sickly nation.

Bottom line: The European debt crisis isn't over by a long shot.  Greece could easily blow up yet again.  Today's agreement needs to be approved by several European Parliaments.  Confidence in Greece and its government runs low.   Numerous problems lie ahead that should spur the value of the U.S. Dollar UUP and safe haven securities like gold GLD.  United States Oil Fund USO and the S&P 500 SPY will likely continue exhibiting current volatility until a new, sustainable trend is established based on a final solution for the European debt crisis.

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