Market players anticipated a last-minute resolution to the Greek drama to start the week but were caught by surprise when Greece actually failed to repay its debt to the IMF. There was a barrage of headlines all week about Greece, but the lack of certainty prevented any good upside momentum from building, although we did manage some overnight bounces. A slightly dovish jobs report this morning failed to overcome the focus on what will happen next in Greece. It wasn't a very good week, but it could have been much worse.
The good news is that we are seeing some underlying support. The weakness has been more a function of a lack of buying rather than aggressive selling. Many market players are still rather unconcerned about Greece, but they are having some trouble navigating the short-term volatility. Many are standing aside and not so patiently waiting for the next piece of news.
This market wants Greece off the front page, and if that happens one way or the other next week we'll have conditions for some upside action. We will then have the kickoff of earnings season and the debate over interest rate hikes will continue, but nothing is worse than the sort of uncertainty Greece has created.
The action this week was lackluster, but it helped to create some pullbacks that are of interest. We just need some clarity in Europe and the traders will start looking to put cash back to work. It is a bit gloomy out there, but some optimism may be justified.
Have a great holiday weekend. Do something fun. I'll see you on Monday.
July 2, 2015 | 2:30 PM EDT
Time to Work on a Shopping List for Next Week
- · The pre-holiday session is winding down with a market that's disinterested.
Trading in front of a long weekend is often upbeat, but that definitely is not the case today. There isn't any aggressive selling, but there just isn't any buying interest. The jobs news wasn't significant enough to produce a sustained reaction, and the tiresome Greek situation is still in a state of flux. While the vote in Greece will help determine what happens next, there still is very little clarity.
Breadth has been slowly slipping all day and we now are 2 to 1 negative on the Nasdaq. Momentum stocks, with a couple exceptions such as Tesla (TSLA), are lagging. If you are looking for pockets of action you are going to have a hard time because there aren't any. If shorting a dull market is dangerous, the bears really need to worry because it doesn't get much slower.
If you are still watching the market, the best use of your time is to simply work on shopping lists. The recent action has been dreary, but it is creating some interesting setups. Whether they work out we will have to wait and see. However, if the market can move past Greece and build some energy, there is going to be some stocks that should produce some good, tradeable bounces.
We'll see what happens into the close, but at this juncture I expect the main thing that will happen is that more people will turn off their computers and start enjoying the long weekend.
July 2, 2015 | 10:22 ET
The Greek Vote Has Traders on Edge
- It looks like appetite is low before the weekend vote.
According to Art Cashin, the day before a three-day weekend has an upside bias 70% of the time. The mood is usually upbeat and traders are looking for action in thinner trade.
Unfortunately, this market has the overhang of Greece, and that uncertainty is pushing folks to the sidelines rather than looking for some trading action. The jobs news was a slight positive for the dovish bulls, but not enough so as to have any sustained impact. The consensus now is that rate hikes will be pushed back to January, but that isn't any major surprise.
Breadth is quite good on the NYSE, with about 1700 gainers to 1050 decliners, but is running negative on the Nasdaq, with a 1000 gainers to 1360 decliners. The bounce in oil is helping the NYSE while momentum names, biotechnology and small caps are hurting the Nasdaq.
It is very mixed action with no strong themes, but that has been the case recently, as we are so focused on headline news.
I continue to be pleased with how Synergy Pharmaceuticals (SGYP), my Stock of the Week, is acting, but the overall action is already quite slow. SolarEdge Technologies (SEDG) is on my radar following some news that it can benefit from Tesla's (TSLA) battery push, but there isn't much else at the moment.
It feels like it is going to be extremely thin as the day progresses, as market players have little interest in trying to trade in front of the Greek vote this weekend.
July 2, 2015 | 8:49 ET
Payrolls Give the Market Pretty Much What It Wants
- This news doesn't change the prospects for a rate hike this year.
The jobs news is mostly in line and that is what the market wants. Average hourly earnings didn't not increase at all, which is dovish, as it confirms that there still is no sign of inflation.
The unemployment rate dropped to 5.3%, but the bears are quick to point out that that is largely a function of the fact that the labor participation rate is the lowest since October 1977.
The key here is that this news doesn't change the prospects for a rate hike this year. Fed fund futures are indicating about an even chance of a hike before the end of the year. Obviously, the longer the Greek crisis drags out the longer the Fed will stay on hold.
We are getting a bit of buying on this news, as it has slightly dovish ramifications with the lack of wage growth and the poor participation rate. It isn't that meaningful in the bigger scheme of things, as it doesn't cause a major change in expectations for the Fed, but it does give traders something to focus on.
At the moment the indices are set to open above yesterday's highs, but the tendency lately has been to lose momentum intraday. With the long weekend coming up it is going to slow down very quickly as the day progresses.
July 2, 2015 | 7:14 AM ET
Traders Need to Stay Very Nimble
- The potential for a leg down is high if we get more bad news.
"The day will be the most memorable in America. I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival...it ought to be solemnized with pomp and parade...bonfires and illuminations from one end of this continent to the other, from this day forward, forevermore."
-- John Adams, in a letter to his wife after the Continental Congress proclaimed the American colonies independent from Britain.
The Greek crisis is still simmering, but this morning the focus turns to the June jobs news, while we wait for the Greek referendum this weekend. The markets have grown less concerned about the Greek situation, despite the fact the Prime Minister Tsipras urged a vote against a bailout. The big concern in Europe has been that Greece would set a precedent for other countries, and that seems to have faded.
While the worry over Greece has receded, there are still plenty of other negatives to worry about. A strong jobs report is going to renew speculation over the timing of an interest rate hike. The Chinese markets continue to undergo crazy volatility and the oil market took a hit once again. We didn't hear much about oil yesterday, but pressure in that sector is what helped to take the market down in the past.
The good news is that stocks are finding some support despite all the negative headlines out there. Greece is still extremely uncertain but that didn't stop the buyers from jumping in yesterday morning. We drifted lower most of the day before a good finish, but volume fell. The bears will claim it was nothing more than a weak oversold bounce. They may have a point, but there was some good action in individual stocks and there is obviously still speculative appetite under the surface.
Typically, the day before the July 4 holiday is a good one. The mood is normally positive, as market players look forward to the long break, and we often have some speculative trading in various pockets of the market. Traders look for this sort of upbeat holiday trading and that makes it self-fulfilling to some degree.
It is a bit more complicated today as there is going to be concern about positioning in front of the Greek vote that will take place over the weekend. Polls indicate now that the country is leaning toward a "yes" vote, which would be a positive as it would force the removal of Tsipras and make a deal more likely. A "no" vote isn't a major negative either as it gives the eurozone cover to declare that they tried but the Greeks didn't have the will to make a deal.
Greece will hang over us and then of course we have to deal with the speculation over the Fed timing of an interest rate lift-out. It isn't quite as tedious, but it does offer plenty of uncertainty and can easily be used as an excuse for more selling pressure, especially if the numbers are too hot.
The bears have plenty of ammunition, which will be a good excuse for accelerated selling should the price action deteriorate. The biggest positive right now is that there is some underlying support and we are not as worried about Greece. That can change very quickly, so we need to keep a very close watch on the action.
The jobs news is coming up and we'll see how that looks. The Fed can't do much with the Greece situation simmering anyway, so that may be overlooked to some degree, but ultimately it is interest rates that are going to be the main driver in the long run.
It is chaotic and there are a slew of negatives. Traders need to stay very nimble and watch careful for clues in the price action. The potential for another leg down is very high if the news flow breaks the wrong way.