The greek government this, the Greek government that. Yesterday the Greek ruling party said they could make a payment to the IMF and other international creditors at the end of the June. I asked how long the Greek credit squeeze has been going on and a trader from a big bank said over 10 years. As a trader, I find it almost shocking how long the Greeks have dodged the bullet, but I am not sure that their time is not running out. In a bid to break the stand off, creditors are now considering an extension of Greece’s bailout program to March of 2016 with President Barack Obama and German Chancellor Angela Merkel stressing the urgency of an emergency finance deal, and asking both sides to be flexible in securing a deal. What a joke that such a small country can hold the world financial markets at bay for so long.
DOW 3 WEEKS OF CONSECUTIVE LOSSES
Over in the S&P futures, it was an early rally and then down with almost no bounce until late in the day. While the volume was a little better, 1.2mil ESM15s traded was lower than what we would expect for the size of the sell off. The late bounce came from the first low at the 2077.75 level, bounced back up to 2086.25, and sold off all the way back down to a new low at 2076.25. Yesterday’s decline was led by the technology sector, continued Greek headlines, and talk of higher interest rates later this year. Like the S&P trading at the same prices for the last 8 weeks, it’s also the same news being repeated and rehashed over and over again. It’s like we are stuck in some type of Greek groundhog day, and I am getting pretty tired of it. That said the (ESM15:CME) closed down 14 points, or -0.7%, and is now up 1% in 2015. The Dow Jones futures (YMM15:CBT) lost 74 points, or -0.50%, and the Nasdaq futures (NQM15:CME) closed off -0.90%, or down 49.25 points on the day. Leading the -1.2% loss in tech shares was Intel Corp (INTL), which closed down -1.7%, and International Business Machine Corp. (IBM), that closed down -1.2%. When the heavyweights are so weak it makes it very hard for the S&P to rally.
The markets are weak and the S&P can’t hold a rally right? Well, thats how it work right now, but thats not how we think the whole week will play out, and next week you have the June Quadruple Witching expiration (see S&P cash study for the June expiration), and then at the end of June you have to worry about the end of the second quarter rebalance. We also will be on lookout this week for the PitBulls “Thursday / Friday low” the week before the expiration. At the end of the day the dollar declined, government bonds strengthened, oil sold off (-1.7%), and the China major market closed higher, while gold rallied (+0.50%). Nothing stays the same for very long and as I have said many times, all this downside thrashing will eventually catch up with the S&P. Do I think the S&P can go lower? Sure but I also think the ES will rally during the June Quad Witching week.
In Asia 11 out of 11 markets closed lower, and in Europe 10 out of 12 markets are trading lower this morning with only the Russian MICEX and the Greek ATHEX trading higher. Today’s economic calendar starts out the: Redbook, NFIB Small Business Optimism Index, JOLTS, Wholesale Trade, and a 3-Yr Note Auction.
Our View: I have to admit that the ES acts pretty bad, but I think it’s a temporary thing. On Globex last night and this morning, the ES sold off and double bottomed at 2068.75, and was trading 2076.00 at 6:00 CT. Volume was brisk with 170,000 contracts traded. Like I said in the video, and above, I thought the ES acted weak, and down it went yesterday, and in Globex. One of the things about the S&P is that traders are always looking for a reason to sell it, and Greece is front and center right now. In some ways I wish Greece would just default so we can see some type of conclusion instead of just kicking the problem further down the road. Let’s face it traders, Greece is never going to meet its full obligations to the creditors, and giving them any more money is wrong. Our view is for more of the same, but we cannot rule out some type of “Turnaround Tuesday” bounce.
“S&P 500 Greek Downward Press”
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- In Asia 11 of 11 markets closed lower: Shanghai Comp.-0.36%, Hang Seng-1.20%, Nikkei -1.76%
- In Europe 10 out of 12 markets are trading : DAX -1.28%, FTSE -0.35%, MICEX% +0.26 , GD.AT +1.74% at 7:00 am CT
- Fair Value: S&P -1.19 , Nasdaq -1.30 , DOW -9.14
- Total Volume: 1.29mil ESM and 3.9k SPM traded
- Economic calendar:Redbook, NFIB Small Business Optimism Index, JOLTS, Wholesale Trade, 3-Yr Note Auction..
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