The June Quad Witch fell victim to an S&P futures that used up all its buying power, and the possibility of a Greek default. When I started to write today’s Opening Print, I did so with the idea that as the markets head into the final 7 trading days of the second quarter, some very negative price action could become a big “bear trap.” As we have said many times, we still believe the risk is to the upside.
Greek Concessions
On Saturday morning the Greek government laid out its latest plan to avoid default. The latest plan for aid makes a major concession on cutting deficits in its pension system. On Monday, Eurozone leaders warned that the possible breakthrough was unlikely. The proposals submitted this morning foresees new pension savings and revenues worth 0.4% of gross domestic product for this year, and 1% starting next year, which would bring the left-wing government in Athens close to the target demanded by its creditors. While the Eurozone is yet to complete the calculations, the proposal could be a big step toward ending the four-month deadlock.
After his election Greek Prime Minister Alexis Tsipras has been reluctant to make concessions on pensions because of how hard it would be to sell it to his far-left Syriza party, which has been impossible to deal with, even as the clock ticks down on the new Greek government. Some in his party seem to prefer losing power to compromise. Jean-Claude Juncker, the president of the European Commission was quoted saying “We have made progress over the last few days, but we are not yet there.”
While MrTopStep has been saying the Greeks will default, we never ruled out the idea of a deal if the Greek government made concessions. But we also do not believe any deal will permanently solve the long term financial need of the country. While the deal is not done, the world markets are taking the news in a very positive way.
STOPS, STOPS AND MORE STOPS
At 7:30 CT Monday morning the German DAX is up 2.80%, and the CAC50 is up 2.65%, with the Athex Composite up 6%. The big question this morning is, can the S&P futures hold the gap up, or as JPMorgan says; sell any deal presented. For MrTopStep it’s all about price action, and getting in and getting out. News, good or bad, helps move markets at at the end of the day. I may think this has gone on too long, but right now it is the only game in town for S&P futures traders. The Eurozone’s portion of Greece’s €245 billion rescue program will run out at the end of June, or in 9 days. If the Greek government fails to make the payment before the end of the five year old plan, the government is set to default on a €1.54 billion payment to the IMF on June 30, and may struggle paying salaries and other government obligations. Other large payments to the IMF and the ECB loom later this summer.
Only time will tell traders…
In Asia 7 out of 10 markets closed higher, and in Europe 12 out of 12 markets are trading higher (DAX +3.0%) this morning. This week there are a total of 20 economic reports, 11 T-bill or T-bond Auctions or Announcments, 1 Federal Reserve Bank President speaking and the US GDP. Today’s eco calendar starts out the week with the Chicago Fed National Activity Index, Existing Home Sales, and a 3 and 6 month T-bill auction.
THE GREEK TEETER TOTTER
Our View: This is not getting any easier, it’s getting scarier. The ES sells off hard Friday; closes on its lows and is up 12 handles off the 2097 Globex low at 2109.00 and then up to 2118.00 this morning. This dance around the big figure ( S&P 2100 ) continues and seems to be waiting for some trigger to break out of the range. We continue to believe that move will be to the upside. Call options or bull spreads are one thing you should consider as a way to ride out the whipsaws along the way. For day traders, as we said, the key is to stay nimble: get in and get out when the trends are happening and don’t expect them to last very long.
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The S&P 500 Futures and the UGLY, UGLY June Quad Witch
- In Asia 7 of 10 markets closed higher : Shanghai Comp. CLOSED, Hang Seng +1.20%, Nikkei +1.26%
- In Europe 12 out of 12 markets are trading higher : DAX +2.85%, FTSE +1.15%, MICEX +0.70% , GD.AT +6.36% at 7:00 am CT
- Fair Value: S&P-7.69, Dow -7.60 , Nasdaq -84.82
- Total Volume: 1.23mil ESU and 6.5k SPU traded
- Economic calendar:Chicago Fed National Activity Index, Existing Home Sales, and a 3 and 6 month T-bill auction.
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