The market did a much better job of holding on to gains today vs. what it did on Thursday, but it still didn't act like it was fully convinced that the Greek drama has come to an end. We had good-sized gains and breadth was solid at about 4600 gainers to just 1230 decliners, but we ended up closing at about the same levels where we opened. There wasn't any intraday momentum to speak of, but that has been quite common lately.
After two ugly Mondays in a row, market players are understandably a little nervous about another negative surprise over the weekend. The market has not done a good job at all of anticipating what is going to happen next and we were jerked around all week as a result.
The biggest complaint most active market players have right now is that stock picking as irrelevant, as we are just dancing around to the headlines. Not only did we have the endless Greek issue again but the wild action in China finally caught the attention of other markets and caused some additional volatility.
We have earnings reports coming in next week, which should help those who are looking for stock picks, but what we really need is some improvement in the charts. I went through quite a few of them today as I wanted to put some cash to work, but was disappointed at how they have developed despite a couple of good days. We still have mostly dead-cat bounces rather than strong momentum and solid leadership.
As I've discussed recently, many individual stocks have been in a bear market for a while already. The indices have been catching up a bit to the downside this week, but the action under the surface is still much worse than what the indices are indicating.
Let's hope Greece will clarify further over the weekend and we can stop thinking and talking about it. It is probably going to be a big problem again in the future no matter what, but this market really would like to move on and focus on other things.
Have a great weekend. I'll see you on Monday.
July 10, 2015 | 10:26 AM EDT
Uncertainty Seems on the Decline
- · Still, traders may wait for an all clear next week before really going to work.
The big question this morning is whether stocks can gain traction on the burst of optimism over a potential Greek deal. It isn't a sure thing yet, but the consensus opinion now is that it will be done. Logically that should put this market back on track, especially because China has been able to put together a pretty good bounce.
While we do have a solid gap-up open and breadth at about 5 to 1 positive, we aren't seeing much chasing so far. We are holding gains but there aren't many signs that market players are worried that this market will run away from them. They are inching in very slowly and are showing some inclination to buy dips.
We still have plenty of news flow out of Europe that can shake things up, but market players are very anxious to put Greece in the rearview mirror and focus on some stock picking. The start of earnings season is another good reason to start looking at individual stocks again.
There is going to be some risk over the weekend that Greece could fall apart again. Market players have not anticipated that situation well and have been stung the last two Mondays. They may be inclined to wait for the all clear next week before they really are ready to go back to work.
The slow fade is occurring again, but the news today is much more concrete than yesterday and I think that will put a bid under the action. If we drip down all day like we did yesterday, it is going to be very discouraging for many market players
I'm looking to inch into a few things such as Facebook (FB) and Second Sight Medical Products (EYES). I'm going to be looking to add positions later in the day once this market proves itself a bit more. There is still plenty of headline-risk, but the uncertainty is declining and that is the key.
July 10, 2015 | 7:15 AM EDT
Pushing a Little Harder to Find New Buys
- Hopefully we will be able to move past Greece, at least for awhole.
"Rescue someone unwilling to look after himself, and he will cling to you like a dangerous illness."
It has taken a few weeks longer than anticipated and it didn't happen smoothly, but we are finally seeing the "Greece is saved" headlines that have been widely anticipated. Market players were caught by surprise when Greek leaders actually went over the brink and allowed an actual debt default, but the attitude has always been that some sort of deal would be done and the day of reckoning would be pushed off into the future.
It isn't a done deal yet, but the new Greek proposals have moved closer to the demands of creditors. Ironically, many of the terms are in direct conflict with the recent referendum that soundly rejected austerity. The Greek parliament still has to approve a deal and there are issues like restructuring long-term debt that are still a problem, but the stage is being set for some sort of agreement to be reached at the meeting this Sunday.
Not only is Greece providing the basis for another overnight spike, but China managed to follow through on its big bounce and there are hopes that things may stabilize now. Apparently, arresting short-sellers is effective financial policy in China.
At the moment, the indices are looking to gap up to almost the exactly the same open as yesterday. Hopefully the bulls can do a better job today of building on the strength and positive move. Yesterday, despite the fact we hit highs at the open, we struggled the rest of the day to do anything further. That was primarily a product of continued uncertainty over Greece and China, but both of those situations feel a bit clearer this morning.
Many traders are exhausted by the recent market action. It has been extremely random, with big overnight gaps in both directions and then lackluster action intraday. One day we have an impressive intraday turn, and then the next it looks like the market is ready to fall into a solid downtrend.
What makes it even more challenging is that the indices have been acting better than individual stocks. Under the surface we have experienced a full-fledged bear market in many individual stocks. Only about a quarter of the stocks in the market are trading over their 40-day simple moving average of price, and over 60% are under their 200-day simple moving average.
There is no leadership right now, which isn't too surprising, but then we also have key stocks like Apple (AAPL) ¿ which is a holding of the Action Alerts Plus charity portfolio co-managed by Jim Cramer -- and an important sector like semiconductors acting quite poorly. Momentum players have had an extremely difficult time lately, as this market simply is not very kind to trend-following strategies right now.
It has been rocky, but hopefully we will be able to move past Greece, at least for a while, and start focusing more on things like earnings which kick-off in earnest next week. Individual stock-picking has been almost impossible lately, due to the intense focus on headline news, but at some point market players will start to focus on differentiating the good from the bad, and that will make trading more interesting.
After the fade yesterday, there is going to be some skepticism about whether the gap up open can hold. The difference, this time, is that there is a higher level of certainty over Greece, which should help give us a bit better support.
There is still a good chance the Greece situation will experience more setbacks, but my game plan is to push a little harder to find new buys. Like most traders, the recent action has increased my cash holdings substantially. I'm not looking to jump in with both feet, but I'm looking to put some money to work incrementally.