Greece, China & IMF spook investors early, rally late

Market gymnastics at it’s best today. The selling pushed the indexes lower by more than 1% just one hour into trading. This was similar to Monday, but the selling accelerated following the opening bell versus¬†the gap¬†lower at¬†the open. If you look at the intraday chart of the S&P 500 index you see the low at 10:45 bounce, then test again again at 11:40 and bounce with a follow through to a gain of 0.6% on the day. The low was 2044 and the close 2081 or an intraday swing of 1.8%… now that is intraday volatility… or is it a bottom reversal? Tomorrow will give us more insight on the latter, but for now you have to feel better about the bounce negative to positive versus¬†another day without any direction. But, nothing changed relative to the catalyst of Greece and speculation surrounding the outcome. Thus, we have to remain patient and let this unfold one day at a time.

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A look at the daily chart shows the break of the 200 DMA and reversal back to the 2085 level of resistance currently. This brings the previous uptrend line into play again and the previous trading range. Some work to do to reestablish the upside move, but we at least have something to watch for tomorrow relative to a follow through or more selling will test the downside. I am not prognosticating to either side at this point, but merely pointing out the need to be patient and not jump to any conclusions based on what we know or see at this point in time.

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The NASDAQ, Dow Jones and Russell 2000 Small Cap indexes all look¬†similar on the selling and bounce back off the lows… Conclusion? Be patient and let the anxiety work out of the market as news and events continue to clamor for attention. Greece for whatever reason is in the driver seat. Unfortunately they need a booster seat to see over the steering wheel, but then that creates the problem of being able to press the gas and brake peddles to operate the car. Thus the confusion along with the stops and starts to the news surrounding the country. In the end it still has been priced into the markets baring an unforeseen event that will derail the US markets based on Greece defaulting on debt. The tennis match continues between Greece the EU and the IMF.

Speaking of the IMF (International Monetary Fund), they reiterated their warning to the Federal Reserve of the United States (largest contributor to¬†the IMF financially, by the way.) to not raise interest rates too soon! They have done such a good job of advising the global economies over the last ten years, why not dole out more advice that has nothing to do with the IMF and their charter. It is like getting advice from neighbor three streets over about the landscaping in your yard. Stop the madness of everyone running the US, well maybe I spoke too soon… Washington could use some help… at least with accounting and balancing the books/budget. But, that would not be the IMF as they can’t balance their own budget… and it is definitely not Greece. It has all been like watching an ant bed that you just stepped on. Total confusion and lack of direction. That all aside… the US needs to raise interest rates… plain and simple.

China is not helping the issue as the markets continue to tumble lower. 20% of stocks listed in China are not trading currently due to the decline in the markets. Where is the advice for them from the IMF (sorry I will stop)? FXI is down 21% as a measure of the correction since late April. The drop of 4.3% today added to the speculation in the US about how that would impact the US markets. Again investors will lose money in China, but we are not lending China money, we do sell them US treasury bonds, but then that would be them lending us money. China is a house of cards and has been for a very long time. Our trade in YANG or FXP has played out well… but, watching the bounce off support today… could produce a short term bounce and it is something to watch and tighten our stops around the move.

Too much happening and not enough of it positive. How it plays out in the short term is still one big question mark. I am still willing to push money to sidelines as stops are hit and wait patiently to see how this unfolds going forward. One day at a time is all we get and all we need for now. Tomorrow will provide more data and answers.