The market spent most of the day running in place as investors tossed and turned over the Greece debt issue and crude oil supplies remain near the 80 year highs. Both are issues that remain on the top of the worry list due to the uncertainty that both bring to the party. First on the mind of investors is the real or speculated impact of Greece withdrawing from the EU and defaulting on the debt to the ECB and IMF. With the deadline the end of the month both sides are posturing for what they want from the limited negotiations. Throw in all the speculation about how to resolve the issues, or if the issues can be resolved at all, and you have the making of volatility due to the uncertainty. I am not sure we gain any movement in a defined trend until there is some clarity on what the approach to Greece will be. The biggest concern that is valid is relative to the other bailout nations like Spain and Italy… will they default and leave the euro as well? You can see how the speculation is feeding on itself and that is not helping the outcome short term either. Legitimate concern, but one that will take time to resolve. Betting on either side is just that… a bet and I don’t like gambling with the market. The word is back… PATIENCE!
The second issue is crude prices dropping again as the supply data continues to validate that demand is not rising and thus far, supply is not falling. Inventory rose 4.9 million barrels for the week and remain at the highest levels since the EIA started reporting in 1980. The size of the increase was again much greater than expected. One quote of interest stated, “the world is awash in crude oil…” The demand side of the equation remains the challenge and until it increases or supply decreases the challenges and volatility will remain in the pricing. There is money to made if you like trading volatile moves… I am not on that list currently and don’t own any positions in crude.
The winner of late in the energy sector has been natural gas. This is a topic we discussed Monday night on the Let’s Talk Money webinar as being oversold and due for a bounce as the weather has shifted to colder in the Northeast. UNG rose 4.5% today and is up 8.9% the last three trading days. Cold is temporarily impacting the supply outlook as consumption will rise short term. Watch tomorrow for EIA Natural Gas supply data to be released after the open and it will shed some short term light on this topic. Like oil the risk of the trade is too high for my taste.
The leader today was the VIX index! It was not crazy on the upside, but intraday it reflected the uncertainty relative to the above issues. The question: if Greece resolves the plan for their debt moving forward and remains in the EU, does the broad US markets rally to new highs? That is something to consider short term as this unfolds. I am not convinced the isn’t any more than an excuse of convenience for traders. We will get an answer in the near term, but the drivers pushing stocks up or down lack sustainability at this point. Thus, we remain in trading environment and unless you are short term trader and opportunist cash is still a valid sector for money.