Did the early sellers this morning really believe it was likely that the market would fall apart on news about Greece? There was obviously some nervousness to start the day, but we have come back so consistently and so often from that sort of open that it is practically a self-fulfilling prophecy.
The indices did a nice job of bouncing and even managed to close near the highs of the day, but as far as reversals go it certainly lacked vigor. We still had plenty of red on the screens and breadth was about 2,250 gainers to 3,600 losers.
The bulls will cite some pockets of strength, with cybersecurity names in particular being the big winners. However, the narrowness of the action is a major issue. You can excuse that by calling it a stock pickers' market, but that is really just a convenient way to ignore the fact that the broader market is not all that healthy. There is still money looking for a place to go, but it is not as confident as it once was.
Greece is going to continue to be a catalyst for this market, but don't forget that we have the Federal Open Market Committee interest rate decision on Wednesday at 2 p.m. Eastern time. Bonds have bounced back from recent pressure, but this interest rate issue is what will be used to justify the next big move in the market. Unless the economy really tanks fast, rates are likely to go up. Then it is going to be interesting to see if the forces that constantly have put bids under this market keep doing so.
Once again this market has great underlying support but very tepid upside momentum. There are some things working, but it's narrow and we are stuck in a trading range. That isn't all bad, but it does mean we have to work harder to produce results.
This market is still holding up, but it isn't easy.
Have a great week. I'll see you tomorrow.
June 15, 2015 | 2:13 PM EDT
Can The Bulls Hold Off The Bears Again?
- Today's finish may be a bellwether in light of recent soft closes.
The dip buyers were a bit slow and they haven't completely embraced this market, but they have the indices well off the early lows and the Russell 2000 nearly positive.
In the old days opens like we had this morning actually would generate some worry and fear. Market players would be concerned that the selling could accelerate. These days, a weak open is just another opportunity for buyers. There is almost a reflexive buy response to any dip these days. We very seldom have trend days to the downside because there are still too many people who believe the market just won't stay down.
This dip buying has been on ongoing pattern for years now, but there is a change in the way the market is acting.The issue recently is the inability to build further momentum once we do bounce. Even though we are well off the lows, the bulls could not build on last week's bounce. The bulls were convinced we were heading for new highs after the move last Wednesday, but there was no V-shaped action.
It is very tough battle out there right now but the bulls still are maintaining an edge. They aren't gunning us higher, but they are doing a good job of stopping the bears when they make an attempt like they did this morning.
One of the more worrisome developments lately has been the soft closes. The close today is going to be a good indicator of overall market health. The bulls really need a close near the highs to show that they are willing to keep pushing. Another weak finish would be a chink in the bullish armor.
I have some individual stocks that are acting OK and I will stick with them. My game plan is to not be too trusting of the market but to make the bears prove themselves before giving up on the uptrend. It is necessary to be selective with buys, but that is what is working.
June 15, 2015 | 10:28 AM EDT
The Market Is Becoming Precarious
- There are some opportunities, but there's great hesitation.
The key to navigating the market is to watch for a change in the character of the price action. This morning we are seeing greater hesitation by dip buyers, which is a change in the usual behavior especially on Monday morning. There is some support kicking in, but we need to watch for lower lows intraday and, of course, the close will be key. Breadth has been running very poor at around four to one red. The pockets of momentum are extremely narrow, and we have no key sector in the green other than precious metals. Bonds are bouncing, and iShares 20+ Year Treasury Bond (TLT) continues to improve, which is primarily a function of increased worries about the economy and Greece.
The good news is that this sort of action does shake things up a bit and creates some new trading opportunities. It may develop into a market downtrend, but given the limited upside momentum lately it may be better from a trading standpoint for stocks to take out support levels and shake up the stubborn bulls. My Stock of the Week, CyberArk Software (CYBR), is acting well and former Stocks of the Week Second Sight (EYES) and Hi Car Services (EHIC) are seeing some interest. There are some longs that are working, but things like Mobileye (MBLY) and SolarEdge Technologies (SEDG) are very volatile and are triggering stops.
The key for this market now is to hold intraday lows and for breadth to improve a bit. We still have some support out there, but it is becoming precarious.
June 15, 2015 | 7:42 AM EDT
Overt Bearishness Hasn't Worked Well
- There is nothing better than dire headlines for dip buyers.
"We ought to put him out of his misery."
--Erich Maria Remarque, "All Quiet on the Western Front"
The misery that has been Greece continues to impact the market. Talks with creditors broke down over the weekend and concerns grew that an actual debt default may occur. This drama has dragged out for nearly five years now and there isn't anyone who isn't tired of it. Many market players would prefer to see Greece leave the European Union once and for all, but the European Union is extremely fearful of the ramifications of such action.
We have a negative reaction to the news, but it isn't that bad. The market was sensing a problem on Friday, which caused a reversal of a two-day bounce, but we have yet to give back all the gains despite the fact that they were primarily driven by optimism over Greece.
The Greece issue is a good example of how the market is grappling with some problems lately and is unable to make sustained progress. It has been holding key technical levels for a while and we have some relative strength in momentum names and small caps, but upside progress has been limited and market players have not been able to build on upside moves like they did earlier in this bull market.
The question we face this morning is whether Greece will be the catalyst for a downside break. The market has been increasingly worried about rising interest rates and the timing of hikes by the Fed, while Greece has simply been an annoying distraction.
The market has been discounting Greece for a long time and it may actually be a positive if it comes to an end and something definitive finally occurs. Even now, many market players cynically believe that it will just drag out longer, as the EU seems fearful of taking a hard line.
While the overall market has some issues, the bulls keep focusing on some decent action in individual stocks. It is very narrow and choppy, with only about 130 stocks making new highs on Friday, but we aren't seeing a downtrend. Support and dip buying keeps popping up at the right time, and the bears are unable to really grab control of the action.
What the market is lacking is clarity. We have uncertainty created by both Greece and bonds, and that is why we can't mount sustained upside. The Greece news this morning means we may actually have greater clarity there soon, but the bond issue is much more important and the market doesn't seem to know what it really wants. The iShares 20+ Year Treasury Bond (TLT) has been pricing in some interest rate hikes, but it bounced on Thursday and Friday and there is enough economic slowness to prevent a high level of hawkishness.
The challenge of this market is that, while upside has been limited, overt bearishness hasn't worked well lately. You can bet the dip buyers are already making plans for taking advantage of this weak open. There is nothing better than dire headlines on Monday morning for dip buyers. They have been so successful for so long with that approach that they have no fear of being caught in a market that doesn't bounce.
The overall market picture is very mixed, so the key is to focus on individual stock picks and to manage them tightly. If the market doesn't bounce back, well, today the character of the market is going to be of even greater concern. There is good reason for caution, but we haven't yet reached a point where we have a clear downtrend.