Markets bounce back and previous highs in sight

Greece gets the credit early for the market heading higher on the rumor their debt was going to get a extension relative to the due date allowing more time for negotiations. That lasted right up to the moment the German Finance Minister stated that was wishful thinking, and no such deal was on the table. If the rally was on the rumor wouldn’t it reverse and sell when it was validated as not being true? Exactly, but the indexes closed up more than 1% on the day making everyone once again happy and willing to put money to work? The numbers relative to performance stated that, but the volume remained on the weak side. That left me with the bigger question… why the willingness of the buyers to put money at risk? Still digging, but in the meantime I want to look at what is moving now and worthy of attention going forward.

Two sectors we discussed in the Let’s Talk Money Live meeting on Monday didn’t fare well today. The first, energy fell on crude dropping 4.4% to $50.52. This was one of the points I made relative to the sustainability of the commodity to rise further on rumors versus demand. Tracking the commodity with OIL, iPath Crude Oil index ETN is a good way to see what opportunities arise in the commodity. The bounce off the low needs to define itself and build a trend reversal before my interest in taking the heightened risk is of interest. Hitting against resistance at the 50 DMA currently. XLE, SPDR Energy ETF fell nearly 2% from the close on Monday, but closed off only four cents on the day. Investors are willing to build positions in the stocks as they believe the bottom has been established. $80.50 is still the level to rise above short term.

The second, Volatility Index (VIX) has established an uptrend off the December lows. The index fell 7.1% today as buyers stepped into stocks taking some of the anxiety out of the market as there was believed to be some clarity relative to Greece. There will be more to come on the topic going forward, but for now watching the support near the 16 mark on the index. SVXY hit our entry point today as a short trade against the VIX.

Financials (XLF) remain on my watch list to follow through on the move higher that related to the Fed hiking interest rates later this year. Higher rates give the banks more profit margin which should help the bottom line relative to lending. The large banks (KBE) moved back above the 200 DMA and could challenge the previous highs if the belief is maintained, and it could be sustainable if the Fed follows through on the hikes. The regional banks (KRE) stand to benefit as well going forward with the regional banks being more dependent on lending overall. XLF did manage to close above the 50 DMA after an early test lower. One key sector to watch near term.

Solar Energy (TAN) continued to move higher gaining 1.3% on Monday. This is one we highlighted with the base forming and then broke through resistance short term. FSLR added 4.9% on the day to lead the index higher. Clearing $48.59 is the level to watch.

Treasury yields are rising with the thirty year moving to 2.57% versus hitting the low of 2.25% just 7 days ago. TLT fell 6.3% during the same period showing the impact of rising rates on Treasury bonds. The ten-year bond moved to 1.99% up from 1.67% and IEF has fallen 2.7%. Risk is high short term and if the money shifts in response to the fear of rising rates… it will need to find a home and that is the key to sector rotation… knowing or following where the money migrates to. We saw today that consumer discretionary (XLY), financials (XLF) and technology (XLK) are among the early leaders. Watching to see how that plays out short term… thus the term, follow the money!

Tomorrow is another day and maybe… just maybe, it follows through on the upside this time around? Patience is still key to putting money to work in the currently market environment.