Today’s opening print is going to be on the light side. Currently the S&P 500 is being held captive to the Greek news wire algos. Every time a negative headline comes out, the S&P finds itself going lower.
Based on yesterday’s close the S&P 500 futures (ESU15:CME) are up +1.24% for the year. The Dow Jones futures are down -0.18% on the year and the NASDAQ futures (NQU15:CME) are up +6.2% YTD. So far, 2015 has been filled with ups and downs, but the markets are not really moving that much. That said, there seems to be an unusually high level of anxiety floating around in the marketplace. Whether it be the high flying yields of the 10 year note, or the S&P 500’s up-and-down price action, the public is taking a step back from buying and selling right now.
With the lack of any 10% corrections, investors are caught with little or no pullback in a six-year bull market run that seems to be lacking an overall bid to the markets. With that in mind, we are taking things one day at a time. Yesterday’s late headlines seem to indicate that the European lenders could be preparing for the worst.
So, can the S&P go lower? Yes it can, but with the S&P off almost 30 handles in two trading days, and the June quadruple witching coming up, I think you have to be prepared for both sides of the market. I still believe that the S&P futures will get past the expiration, but with so much movement in bonds, and selling going on in the stock market, it’s hard to believe that the last trading day of June will not be an important one.
As traders, we live in the here and now and that means this week’s Quad Witch. The S&P looks bad but we all know it’s all about the next Greek headline that hits the tape.
As the week rolls on, I suspect there will be good and bad news out of the Greek credit negotiations, but as JPMorgan said, any deal should be sold.
In Asia 8 out of 11 markets closed lower (Shanghai Composite -3.47%), and in Europe 8 out of 12 markets are trading lower this morning (DAX -1%). Today’s economic calendar includes day one of the two day FOMC meeting, Housing Starts, and Redbook.
Our View: I love the markets, but I hate the protracted negotiations with the Greek government. I think of it like this, if the Greek government had any intention of negotiating a good faith settlement with its creditors, I doubt this back and forth would be going on. At some point the Greek government is not going to be able to pay its bills. Creditors will be left out on a limb. Does this happen at the end of the month or does this happen in six months, or eight months, or even 12 months? For the sake of the markets, as a trader who’s been on the floor for 38 years, I say let the Greeks fall. They shouldn’t have been in the European Community in the first place. Our view is for more of the same stupid stuff, but with a different slant, and that’s to the upside. Overall we lean to buying weakness, but we are prepared to trade both sides. We lean to selling 10+ handle rallies and buying weakness.
As always please use protective stops when buying and selling futures and options. Basic trading rules apply.
“Greek Plan D”
- In Asia 8 of 11 markets closed lower : Shanghai Comp. -3.47%, Hang Seng -1.10%, Nikkei -0.64%
- In Europe 9 out of 12 markets are trading lower : DAX -1.00%, FTSE -0.61%, MICEX -0.16% , GD.AT -3.44% at 6:00 am CT
- Fair Value: S&P-9.04 , Nasdaq -9.35, DOW -92.95
- Total Volume: 1.99mil ESU and 6k SPU traded
- Economic calendar: Day 1 of the 2 day FOMC Meeting , Housing Starts, Redbook..
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