Greece Roils Markets – Opportunity ?

Investor’s first read Daily edge before the open

DJIA: 18,039
S&P 500: 2,108
Nasdaq  Comp.5,082:
Russell 2000: 1,268

Friday, June 12, 2015   9:11 a.m.

SUMMARY

      Wednesday’s dramatic  bounce was just what the bulls needed to avert a breakdown below the lower limit of the market’s four-month trading range.

      Since February, the S&P 500 has plunged three times  within an established trading range (see below) only to rebound again yesterday.

      Yesterday’s market spiked as expected in early trading, then ranged sideways for the remainder of the day.

TODAY

     Once again Greece’s problems become the world’s problems.  The EU has given Greece until the end of the day today to come up with a plan to extend its bailout. That would give the finance ministers a chance to review it over the weekend in time for the June 18 (Thursday) meeting in Luxembourg.

     The consequences of Greece exiting the Eurozone are so dire, a compromise is likely. Not only would it be devastating to Greece’s economy, but its impact on global banking and financial circles could be dramatic. 

      Even so, this impasse is great enough to send investors to the sidelines, especially with a weekend intervening.

      Support today:  DJIA: 17,910; S&P 500: 2,095; Nasdaq Comp.: 5,044      

BONDS:

     Bond prices were firmer yesterday following a nasty plunge since February as interest rates firmed.  The iShares 20+ year treasury bond ETF was down close to 20% in four months.                              

TRADING RANGE

     The four month trading range intact since February is (DJIA: 17,600 to 18,300; S&P 500: 2,040 to 2,130; Nasdaq Comp.: 4,856 to 5,100).

     The BIG question on the Street now is in which direction will a breakout will occur – Up or Down, and of course, when.

     Barring unexpected bad news, it doesn’t look like the breakout will occur on the downside any time soon, given yesterday’s strong rebound.

      I think the possibility that needs consideration is for an upside breakout after a sharp shakeout on the downside, one that could momentarily penetrate the low end of the trading range. I see that happening in August/September.

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THE FED

     The FOMC meets next week, so the Street will ponder the possibilities of a bump up in interest rates. The action in the bond markets indicates major concern that rates are rising sooner rather than later.  The iShares 20+year T-bond ETF (TLT) has dropped 16% from its February 52-year high and is now back to October 2014 levels.          

     The surge is stock prices yesterday raises doubts that a rise is coming shortly even though the TLT continued to move up.

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ALERTALERTALERT, etc.

     The six months period between Nov. 1 and May 1 has historically been the best six months for the stock market.* The six months between May 1 and Nov. 1 has underperformed. Consistent as this seasonal pattern has been, it must be noted that opportunities to trade against these trends have occurred often.  Analysts and the press will make a lot of noise about this phenom in coming months –  be careful.

     The DJIA and S&P 500 are unchanged since April 30.
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My Technical Analysis of the 30 DJIA Companies:  

On occasion, I technically analyze each of the 30 DJIA stocks  for a reasonable risk, a more extreme risk, and an upside potential over the near-term. I add the results of each, then divide by the DJIA “divisor” (0.1498588) to get the DJIA for those levels.
     As of  June 5, a reasonable risk is 17,763; a more extreme risk is 17,556 The upside potential is has dropped with the market’s inability to follow through last week and is now 18,160. 

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KEY EXTERNAL FACTORS: 

-Stock market bubble – China
Q2 earnings for some companies will suffer from U.S. dollar’s strength and plunge in oil prices.
-Market still keyed on the Fed and it’s first bump up in interest rates, which with a slight softening in recent economic reports looks like it may happen later rather than sooner.
Recent strength in employment and housing industry shifting concern from a weakening in the U.S. economy to enough strength to prompt an early bump up in interest rates.

Note: Source of economic data

For a weekly economic calendar and good recap of  indicators, go to mam.econoday.com.

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*Stock Trader’s Almanac

George Brooks
Investor’s first read
A Game-On Analysis, LLC publication

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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk

 

 

 

 

 

 

 

 

 

 

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