The action today was a great example of an intraday reversal. The gloom was so thick you could cut it with a knife this morning as many stocks were thrown overboard with little concern for exit prices. It was the most negative action in very long time, which is something given how challenging market has been lately.
Just when it looked like some key technical levels would fall and panic would take hold, the buyers started inching in and the buying slowly picked up. A few positive headlines out of Greece spurred more buying and as the indices inched higher, the shorts covered and the nervous dip buyers finally gained the courage to jump in. Before you knew it the indices were green and everyone was wondering why there had been so much negativity.
Of particular interest was the lack of an obvious catalyst for the reversal. There were more rumors about a possible Greece deal but nothing of any great consequence. The buying was primarily a function of emotions becoming too stretched and technical buyers looking for bounce points. The lack of a clear catalyst is favorable as it means there is an appetite beyond just trading the news headlines.
While it was a positive reversal, the market still has issues. It just avoided losses and didn't make up much ground. Breadth was still negative and there weren't many stocks with big gains. There were sighs of relief as huge losses were avoided by those who refused to take stops this morning.
Typically, market players look for upside follow-though after a reversal day like this but it isn't a certainty. We still have a lot of headline risk about not only Greece but about China and oil as well. Many bulls were trapped recently and there are likely some that wouldn't mind an exit if they can sell into strength. That creates overhead resistance and is likely to be more of an issue than in the past.
It was a big win for the bulls today as we avoided falling into the abyss, but it is going to take sustained effort to keep it going. The wrong headline could easily cause more drama. Stay disciplined and opportunistic.
Have a good evening. I'll see you tomorrow.
July 7, 2015 | 1:40 PM EDT
Still Dancing to the Headlines
- There is enough negativity to bounce hard if the right news shows up.
Although the indices did a poor job of reflecting the tone of the action, the selling this morning was some of the worst we have seen in a while. There were signs of fear and disgust as many stocks were dumped into weakness.
It may have been enough negativity to produce a little capitulatory action. We don't see that very often in this market, which has lived off dip buying for so long, but the action this morning worried some of the bulls and kept them on the sidelines for a little while.
Markets are bouncing back now and we'll see how it goes into the close. We have had some better closes the last few days and some of the bulls were downright excited after the close last night. The indices really need to hold up now or they will fall into a confirmed downtrend.
One positive that this market has going for it is that many individual stocks have already had very deep corrections. It has been said by some that the majority of the market has been in a bear market for a while already; it has just been hidden by the indices. The business media is generally blind to underlying action and they have missed reporting how poor the average stock has done compared to the indices, which are lackluster.
We are still dancing around to headlines out of Europe and the potential for spikes is very high. There is enough negativity to bounce hard if the right news shows up. The selling this morning is helping the action move to the point where we can see sustained upside action. We are shaking things up a bit and that is a positive although the process can be painful as stops are triggered.
More European summits are being scheduled to discuss Greece, so this headache will drag out. At least we are seeing stronger emotions for a change. Ultimately, that is a good thing.
July 7, 2015 | 10:14 AM EDT
Markets Still Sliding on Greece
- There's no interest in buying with this ridiculous Greece thing hanging over our heads.
Futures were frisky overnight but there wasn't any clear reason for it. There were random comments about Greece but nothing that indicated that a resolution was forthcoming.
This morning we are back to the same old grind as we wait for Greece to offer new proposals to be debated in Brussels. So far there doesn't seem to be any indication that something reasonable will be on the table, and that is preventing the market from gaining traction.
Breadth is particularly poor on the Nasdaq, where it is running close to 3 to 1 red. The NYSE is looking a bit better but its running 10 to 17 negative. Momentum names are dead and there are no pockets of strong action to be found. There are a few random movers like GoPro (GPRO), DepoMed (DEPO) and Himax (HIMX) but no themes or sectors of note.
There are times when the market just doesn't offer much opportunity, and that is the case for stock pickers now. We just don't have any interest in buying with this ridiculous Greece thing hanging over our heads. It doesn't help that China is a mess and oil is falling apart again, either.
It is the nature of the beast to go through periods like this and we simply have to wait for things to shift again. The trading will inevitably improve but patience is required. The easiest way to get in trouble in a market like this is to start forcing trades.
Synergy Pharmaceuticals (SGYP) continues to act well but there is nothing else on my screens of interest. The indices are hovering around the lows of the day and are in danger of taking out yesterday's lows. A breach of that level is now occurring in the Russell 2000 and that is not a good sign.
July 7, 2015 | 6:54 AM EDT
It's a Stock Pickers' Market, but Pickings Are Slim
- We need to manage capital carefully.
"There is nothing more exhilarating than to be shot at with no result."
The predictions of stock market doom and gloom filled the air after the "no" vote in Greece on Sunday. Many pundits were surprised by the lopsided vote, and were convinced that it would spook the market and produce a cascade of selling.
After a little selling to start the day, the primary reaction of market players was a shrug. The selling was little more than a hiccup, and the early indications are that it will be completely reversed by the open this morning. Greece made for some sensationalistic headlines but it isn't having much impact on the stock market action.
It is unclear whether market players still think a deal will be made, or that they simply don't think a Greek exit is going to be that big of a deal. It is very likely that most market players are just sick and tired of the situation, and trying hard to put it behind them. It would be a nice change to focus on stocks rather than more headlines about Greece.
The summit in Europe today will produce more headlines, and there is a great probability that we will continue to dance around to the latest news, but the market has shown it is going to take something extremely dramatic for Greece to really impact it.
While the tepid reaction to Greece is a positive, there is no shortage of issues that could upset the market. Chinese markets continue to implode despite furious efforts to prop them up. You might think that government officials would appreciate the futility of trying to manipulate a market, but that isn't stopping them in China. So far, other markets haven't been impacted much by China, but it helps to create a backdrop of uncertainty that can impact overall market tone.
In addition to China, the oil market has been suffering weakness again. Oil was a major downside catalyst not that long ago, and it also is serving to temper sentiment. The March lows for oils aren't that far away and the technical picture there is very poor.
The negatives out there are reflected in the charts. While the indices have held some areas of support, there is quite a bit of distribution and the risk of failed bounces is very high. So far we have done a nice job of testing last week's lows and bouncing back, but the charts definitely have issues and we can't be too trusting. There is nothing in the charts of the major indices to signal that the worst is over.
One positive out there is that there is some optimism about the upcoming earnings season. If nothing else, many market players are looking forward to focusing on micro matters rather than macro news. Some good reports from individual companies will help to push Greece and China out of the forefront, for at least a little while.
Overall, the market is still under pressure. In some ways the tepid reaction to the Greece crisis is a negative, as we didn't have the big collapse and washout that would clear the air and set the stage for a recovery. We still have potential for another leg down. We are seeing support now and we have to be very aware of the potential for a failed bounce.
This is an extremely volatile market right now, due to the flow of major news headlines. What makes it worse is that there isn't much positive action in individual stocks. While it may be a market for stock picking, the number of stocks that are acting well and offering good trades is very contained.
As always, the best course of action is to just keep plugging away and to watch closely as things develop. The risks are high, but the good news is that volatility and uncertainty does lead to better trading. We just need to make sure we manage capital carefully.