Following the gap-up open on news of a deal with Greece, the market traded in an extremely tight range but buyers showed up late and we ended up with a solid close. Although it was slow and boring for most of the day, the overall action was clearly positive and the bulls regained the upper hand.
The strong finish was particularly important. The market has closed lower than it opened 12 of the last 15 sessions, so it was a nice shift in the character of the action to have the buyers step up to buy stocks into the close. There has been so much fear and uncertainty about the news flow out of China and Europe over the last few weeks that there hasn't been much appetite for overnight exposure.
Breadth was solid at better than 2-to-1 positive and we had key momentum groups such as biotechnology and solar energy coming back. Even semiconductors, which have lagged recently, showed a little spirit.
While it was a good day for the bulls, we still have the issue of limited upside momentum. What has plagued the market for a few months is the inability to really build on strength. We aren't seeing wild chasing caused by fear of being left behind. Market players no longer are as worried about one-way action that won't let them.
The key now is for the bulls to build on today's strength. We've had a few spikes lately, but we haven't been able to put together a string of good days. We always seem to have some news headline pop up to kill the strength. This time the news flow is different and maybe that will make it possible for momentum to blossom.
Technically, the S&P 500 is still under the 50-day simple moving average and there is no clear uptrend. The bulls made some progress today, but they have more work to do.
Have a good evening. I'll see you tomorrow.
July 13, 2015 | 12:53 PM EDT
Market Action Is Good but the Chase Is Off
- ·There should be a solid close, but it's dead in the meantime.
We have gap-and-sit action as market players provide good underlying support but aren't inclined to do much chasing. The action is solid on good breadth, but there isn't any great fear that this market will run away. The conditions that generated so many V-shaped moves in recent years no longer seem to exist. There is plenty of support, but the bears aren't nearly as toothless or as worried as they have been in the past.
Conditions do seem supportive of more upside, but the challenge is finding some vehicles for the ride. The recent action has done quite a bit of damage to charts, and the character of the action in many individual stocks has changed. We are not seeing much momentum or trend following. What has worked best is dip buying or buying broken charts off support levels.
We still have risk of some negative headlines about Greece as the deal is not going to be an easy pill to swallow, although there is no other alternative. In addition, it would be quite surprising if the crisis in China stocks is now over. There has been a big bounce there due to governmental efforts, but there are still many stocks not trading and a major shift in sentiment as a result of the recent problems.
It is dead flat out there intraday and there isn't much to do but keep looking for new buys. This sort of action often leads to a solid close, and that is what I'm looking for.
July 13, 2015 | 10:17 AM EDT
Stock-Picking Action Looks Good for Bulls
- ·Players are happy to set Greece aside, at least temporarily.
The Greece situation may not be totally resolved but market players are so sick and tired of it that they are happy to set it aside, even temporarily. We had a strong open but not wildly euphoric. Breadth is running very solid at better than three-to-one positive and there is leadership in biotechnology, retail, solar energy and select big cap momentum names.
This is speculative, stock-picking action, rather than reacting to news headlines and has a better feel to it. Market players are feeling they can focus more on individual stocks as the macro situation clarifies, which is helping to produce better trading.
My "Stock of the Week," Facebook (FB), is going particularly well, following a gap-up open and is joined by Netflix (NFLX), Amazon (AMZN), Google (GOOGL) and a number of other big-cap, high-beta names. Apple (AAPL) is still a bit sluggish but looking better.
While biotechnology looks the most interesting from a trading standpoint this morning, there are several things of interest on my screens, including Facebook, Mobileye (MBLY), bluebird bio (BLUE), Teladoc (TDOC), Cambrex (CBM), Lion Biotechnologies (LBIO) and Guidance Software (GUID).
The opening gap was not faded and now the dip buyers are being forced to chase. This action is looking good for the bulls.
Jul. 13, 2015 | 6:56 AM ED
There's Relief, but Also Quite a Bit of Skepticism
- Greece still has to enact some laws for the bailout to work.
"Trust needs to be restored."
--German Chancellor Angel Merkel
Market players have always been optimistic that a deal would be done to save Greece and this morning they have been proved correct. It has been a very bumpy road and the journey isn't over yet, but with time quickly running out, Prime Minister Tsipras capitulated and agreed to a deal that was far worse than what he could have made a week ago.
Greece still has to enact some new laws to approve the bailout, including a provision for collateral of 50 billion euros ($55 billion), and has until Wednesday to implement the necessary changes. This is going to result in a tumulus political battle, so the drama isn't over yet.
While we have a positive market reaction, there isn't a wild celebration. The mood is one of relief that this saga is finally winding down, but there is still quite a bit of skepticism about the likelihood that Greece will be settled once and for all.
Markets in China had another good night, which is helping to produce the morning bounce, but we also have some severe pressure on oil due to the prospects of an Iranian deal. Of course, earnings season is starting this week, and that is sure to create some additional action.
With both Greece and China becoming less uncertain the market is in position to regroup and return to technical health. It has been a choppy and sloppy mess lately, as we have danced around to the headlines, but overall there has been some support, and we have never had enough weakness to fall into a solid downtrend. There has been dip buying support and some good spikes, although we have also seen some very nasty intraday fades as well.
The Greece news is priced in to a degree, which is why we aren't gapping up bigger, but the big positive is that this deal will help to provide underlying support. There now is less risk of the eurozone falling apart, and that is what the market has always been concerned about.
The recent price action has helped to build up some cash on the sidelines, and now market players will be looking for entries. It is important that we don't have another intraday fade, but I'll be looking for bargain hunters to jump in on weakness.
This market still has some technical problems, but the news flow is much more supportive and we'll see if it is enough to restore optimism. I'll be looking for some entries this morning, but I'm not going to rush to buy the gap up open.