The market kicked off the week with a positive reaction to news about Greece, but things quickly settled down and we ended closing right where we opened. Although we didn't make any progress intraday, we still had solid gains. There were over 3,600 gainers to 2,200 losers and nearly 400 stocks making new 12-month highs. It was good action, but the bulk of it occurred overnight rather than during the trading day.
The big challenge of this market isn't determining direction. We are clearly in an uptrend. The challenge is finding the best pockets of strength. As the old saying goes, it is a stock picker's market. You have to be in the right names to really prosper in this environment and that isn't always easy.
Ironically, the rather dull intraday action is a good setup for another spike up on the next round of news out of Greece. The market is just automatically buying anything positive about Greece and never seems to fully discount a deal. At some point, the deal will be done and it is going to be interesting to see what the bulls come up with as the next catalyst.
As I've often discussed, the key to this market is to stick with the price action and not try to call tops or anticipate turns. You might feel distrustful of this market, but that doesn't mean you should act on those fears. The only way you can make money in this environment is to focus on stock picking and stay with good long positions.
It is very easy to focus too much on negatives and miss out on gains. Think positive.
Have a good evening. I'll see you tomorrow.
June 22, 2015 | 1:47 PM EDT
Market Momentum on Greece News Is Fading
- ·But then, losing momentum has been a familiar story.
The indices avoided a "sell the news" reaction to this morning's Greece developments, but they are unable to gain additional momentum and are slowly losing steam. Breadth is still pretty good, but the S&P 500 is hovering around the intraday lows and there is plenty of mixed action under the surface. A few names like Fitbit (FIT), Facebook (FB) and Netflix (NFLX) are entertaining the hot-money traders, but once again the pockets of momentum are narrow and there are some landmines like Ambarella (AMBA).
The most challenging thing about the market for a while has been finding sustained momentum. There are some stocks that have become quite extended, but it has been a very mixed bag. You can find flaws with this market, but there are plenty of positives and you can always count on another headline about Greece or the Fed to provide support.
We'll see how we finish, but there is going to be more news about Greece and you really have to be a pessimist if you think it won't be greeted favorably by the market. The trend is positive, breadth is pretty good and the indices have gains. It may be a bit dull and slow and the fact that we are hitting the intraday lows isn't a good sign, but it hasn't paid to be too negative. Keep on looking for long opportunities.
June 22, 2015 | 10:32 AM EDT
Spikes Continue on Greece Headlines
- · The dip buying is so automatic it's hard to imagine what can kill this market.
A gap-up open on talk of a Greece deal and then a number of comments about how it was no sure thing would seem to be an ideal setup for a "sell the news" reaction but that just doesn't happen much these days. We did see a little selling into the early strength but that lasted only a few minutes and we are now at the highs of the day.
One of the most amazing things about this market is that we'll likely see more spikes on any positive news on Greece. The computer programs automatically buy this news, which never seems to be fully priced in.
Regardless of the headlines, the price action is quite good. Breadth is running about 3,850 gainers to 1,450 decliners, with biotechnology, drugs, chips and financials all doing well. Precious metals are lagging and iShares 20+ Year Treasury Bond ETF (TLT) is giving back its gains from Friday.
The dip buying support is so automatic it is hard to imagine what can kill this market. Putting money to work continues to be the main theme and that is why all news is good news.
I have a few things on my radar, including Second Sight Medical Products (EYES), Vasco Data Security (VDSI), TG Therapeutics (TGTX) and eHi Car Services (EHIC), which is my Stock of the Week.
We just had another small spike in the indices on more Greece headlines. The big danger for this market may come when that saga finally comes to an end, regardless of the resolution.
Jun. 22, 2015 | 7:34 AM EDT
The Bulls Have the Advantage
- It's not a good idea to sell the news now.
"When the final result is expected to be a compromise, it is often prudent to start from an extreme position."
--John Maynard Keynes
Last week, U.S. markets ignored a steady diet of pessimistic headlines about a resolution of the Greece debt crisis. The Nasdaq managed to take out the all-time highs it hit over 15 years ago and the indices racked up some good gains. The Fed helped quite a bit when it lowered its growth and employment forecasts and didn't sound aggressively hawkish, but the most interesting thing about the market action was how the predictions of disaster due to Greece were totally ignored.
It turns out that the crowd that determines market direction had some good insight, as there are headlines this morning that a deal with Greece is likely. Greece has relented on a few key items such as tax hikes and retirement age, which is creating hope that a deal may actually occur this time.
The Greece saga has been running for five years now, so it is not too surprising that it isn't coming to an abrupt end with a quick exit from the European Union. The powers that be want a deal, and there are either going to finally make one or keep pushing things down the road until one is made.
The market really was never worried about the potential for a deal, so the big issue now is how much the market can run when something happens that it has already anticipated. Will we gap and run or is this a setup for a "sell the news" reaction?
In this market environment, "sell the news" just doesn't happen very often. Good news triggers the computer programs and underinvested bulls scramble to find long exposure. The bulls actually are hoping for some selling of the news, because it makes the job of putting idle cash to work a bit easier.
The bears have been making louder news lately, as they bet against a Greek deal and focus on volatility in the bond market. The big swings in the Chinese market are also giving the doubters some ammunition, but betting against this market continues to be a very poor bet.
Although the indices are in good shape and we have a gap-up open this morning, that doesn't mean that the market is without some issues. As I've discussed, leadership has been fairly narrow and the number of stocks making new highs is suppressed.
What struck me this weekend, as I reviewed charts, was that the small group of strong stocks are quite extended and there are very few names with good setups. They either have already run or are struggling to hold support. You really have to dig deep to put money to work.
Five years ago I'd actually consider "fading" this open. Monday morning gaps used to be invitations to take some profits as there was a good chance we'd pullback and there would be an opportunity to reload. In the "new" world it has generally been a bad idea to look for a quick reversal of Monday morning strength. The chances that we'll gap and run are high, and even if we do dip the buyers are lined up and ready to pounce.
The bulls have the advantage and even though a "sell the news" reaction to Greece sounds logical, the best approach is to stay with the uptrend until there is a real shift in the price action. This market wants Greece to go away and it looks like it may get its wish, at least for a little while.