Despite some minor nervousness, the indices held up well as we continue to wait for some news about the European Union deal with Greece. Something should be released before the open tomorrow and, hopefully, we can move on to something else.
Most market players find it absurd that there is so much focus on such a small country, but it reveals the structural flaws of the EU. Ironically, the biggest fear out there is of being left behind when Greece is saved once again or the problem is pushed down the road.
While the action had a slight negative bias today there was some decent action in biotechnology and chips. It was extremely choppy and there were quite a few ugly reversals, but after shaking the trees in the early afternoon we did manage to close near the highs.
It is an odd environment where we are seeing trading-range action. There isn't any big upside momentum but there is good underlying support, and that is helping to keep sentiment positive. It is going to be very interesting to see how things resolve once the Greek circus no longer dominates the headlines. The bulls seem convinced that this market is heading for new highs once that uncertainty is resolved, but 2015 has been a year of very choppy action and it has not been easy to trust in the upside.
I'd like to tell you that it's a good stock-pickers market, but it isn't. It is far too choppy and chaotic. If you're flipping fast you are likely having a hard time holding on to gains. This market is acting very differently, and you must be ready for that to continue.
Have a good evening. I'll see you tomorrow.
Feb. 11, 2015 | 10:16 AM EST
It's Your Move, Greece
- Once they're out of the way, the market can focus on stock picking.
It is almost like Fed day as we wait to hear news from the emergency European Union meeting in Brussels. There is a high level of optimism of something favorable, but the action is a bit more nervous today and Europe is trading in the red.
Meanwhile, market breadth is running 2,100 gainers to 3,000 losers and the action is quite mixed. "Junk" names like Ballard Power Systems (BLDP) and Plug Power (PLUG) are active, while a few biotechnology names are popping up. The big-cap leaders like Apple (AAPL), Starbucks (SBUX) and Disney (DIS) continue to lead.
It's a strange environment as the technical action is better, but the next move is going to be determined by Greece. I suspect there will be some dip buying on a negative reaction, but the potential for a big swing is very high.
Once we have Greece out of the way, we can focus more on stock picking but it's a gamble in front of that news. A lot of bulls aren't worried, and they have been right much more often than they have been wrong.
Feb. 11, 2015 | 7:57 AM EST
Stay Alert and Ready for Defense
- The potential for a bull trap is very high.
"Keep a light, hopeful heart. But expect the worst."
-- Joyce Carol Oates
The market has rallied numerous times over the last few years on news that Greece has been saved and would remain a member of the European Union. Yesterday it happened again -- but this time the market didn't even wait for an actual meeting. Despite a new government that refuses austerity, the market was optimistic that a deal would be made to give Greece more time to work out its debt issues, although there is very firm opposition to any actual debt reduction.
The market acted like it was a done deal on Tuesday and it produced some positive technical action. While volume was still light, it did pick up a little and produced an accumulation day. That was enough to produce the Investor's Business Daily market outlook into an uptrend. The indices are all within spitting distance of the December highs and that has market players feeling more confident.
The big issue now is whether the market is correctly anticipating that some sort of deal will be reached in Europe. It is a bit ridiculous that a country that isn't any bigger than Procter & Gamble (PG) has such a major impact on markets around the world, but it goes to the issue of the solidarity of the European Union and the currency. No one really wants to know what would happen if the EU started to fall apart, and that is the real issue. European indices are all negative in the early going, as nervousness over this meeting builds.
Oil prices are seeing a little pressure once again, but outside of Greece there isn't much news flow. Earnings season is winding down and there isn't any notable economic news on the schedule other than oil inventory. We are moving on Greece and that is about it.
The market's lack of nervousness over Greece suggests that buyers are underinvested once again and anxious to build long exposure. This is the dynamic that has produced the consistent V-shaped moves, but the action so far in 2015 suggests that it isn't going to be as easy. We have had a tremendous amount of choppiness and have made very little progress since the start of the year. The potential for a bull trap is very high and we are likely going to see a high level of volatility as news emerges from Greece later today.
The market is an optimistic mood but the potential for a negative surprise is high. Stay very alert and make sure you are ready to play defense if the market's hopes and dreams don't pan out.