Just about everyone who pays attention to the market believes the Greek drama is downright comical, but it still is moving the market around. We had a little weakness this morning on a story out of Germany that the EU was preparing for a Greek exit, but then we rallied this afternoon on news of a deal.
The deal, which hardly warrants the name, is that the day of reckoning will be pushed four more months down the road. There were no agreement as to actual reforms or budgetary plans, which are supposed to be announced on Monday. The bad news is that there is no way that this charade is ending. The good news is that we can have another dozen Greece-is-saved rallies in the future.
The action today was very similar to the action every other day this week. We started off a bit slow, but the dip buyers showed up quickly and it was upside for the rest of the day. Volume was mediocre, but breadth was pretty good and there were a few narrow pockets of momentum. The market didn't have huge gains, but there was obvious underlying support and the bears were totally toothless once again.
With this Greece issue at least partially resolved, the big question for next week is whether we can build further on this rather tepid breakout move. While the indices are making new highs, it isn't coming with the appearance of much conviction. On the other hand, that has been the nature of breakout moves in this market the past few years. Volume is almost an irrelevant indicator when it comes to the indices.
You might think that this Greece news would set us up for a sell-the-news reaction. As I've discussed before, that is a dynamic that hasn't worked very well for a while. Even when good news is highly anticipated, it just seems to trigger an appetite for more buying. We never seem to arrive at the point where market players are more worried about protecting gains rather than putting more money to work.
Have a great weekend. I'll see you on Monday.
February 20, 2015 | 10:35 AM ET
Greece Stirs Up Some Nervousness
- It is beginning to look like a deal isn't sure.
We had the standard early weakness and dip-buying bounce this morning, but the buyers were ambushed as worries over a deal with Greece suddenly emerged. The market has been remarkably unconcerned about Greece all week, but now there actually are some concerns that a deal isn't a sure thing. Greece has been saved so often it really would be a surprise if there isn't at least another delay, but we have some nervousness this morning.
After the action we've had this week, it isn't at all unhealthy to stumble a bit, as some profit-taking occurs. We really need some backing-and-filling and resets in order to produce some better setups. This low-volume upward drift makes the bulls feel good, but it doesn't give us a lot of great trading setups.
I continue to dink around with a few smaller trades. I've added to MEI Pharma (MEIP) and Ariad Pharmaceuticals (ARIA). Also Cross Country Healthcare (CCRN), GrubHub (GRUB) and a few others on my list for review this afternoon.
We are starting to see some signs of underlying support as I write. It is virtually impossible to frighten this market for long. In fact, I'm sure there are many bulls that would view a Greek exit as a great buying opportunity.
Feb. 20, 2015 | 7:44 AM EDT
A Quiet End to the Calmest of Weeks?
- There are still so many folks trying to put money to work.
Power is so characteristically calm, that calmness in itself has the aspect of strength. -- Edward G. Bulwer-Lytton
It has been an extremely slow, but steady, advance for the market as we wrap up the calmest week of the year. The DJIA has managed to add a grand total of 13 points so far this week, while the S&P 500 tacked on a gain of 0.43%.
While the small gains aren't that surprising or unusual, what is most notable about the action is that we have barely dipped. There has been no downside at all. The S&P hit a low at the open Monday morning and has not been below that all week. After a high level of volatility for six weeks, it has been extremely placid action.
Another surprising thing about the action this week is that some rather significant news events haven't had much impact. We continue to see some minor reaction to the ongoing Greek saga, but the market really hasn't cared that much about this tiresome story. There is some news that the ECB is preparing for a Greek exit from the EU, but the indices are flat as I write.
The other big news event was the Fed minutes, which sounded quite dovish. But after a brief blip, bonds continued to struggle and stocks didn't seem convinced that higher rates were still be delayed. The economic news is giving the doves some ammunition, but the market is no longer seeing the same tailwind it once did from the Fed.
The other major news this week has been oil, which many pundits now think has bottomed. The indices have been moving to some extent with crude prices. The fact that oil has been holding is helping to provide underlying support for the broader market.
While the indices have been very calm, the underlying action in individual stocks has been much more interesting. We've had some small pockets of momentum in sectors such as restaurants and cloud security, but it has been limited. We've also had quite a bit of speculative action in lower priced biotechnology stocks. There has been more movement in low-priced stocks in general as market players hunt for action.
The biggest positive the market has going for it is that there are still so many folks trying to put money to work. While the mood seems complacent and gives the contrary bears some hope, what they are missing is that there is still plenty of cash looking for a place to go. Contrary thinking only works when conviction is strong and has already been acted upon. That is not the case with this market.
Futures are flat, we'll probably have some reaction to Greek news again today, but there is no economic news on the wires and not much else going on. Traders will keep looking for action and that will be focus once again.