Early bounce from selling gives way to selling as the news hammers on the issues created by a country with 6.6 million people and the economic power of the state of Louisiana. It is perfectly clear this is about more than what happens in Greece. The worry about contagion on both a political and economic front are at the root of the worries currently. How well can this be contained and what will it take to contain it? The more variables that are introduced and the fact that everyone is speculating on the outcome is only going to make it worse near term. I am sticking with the fact there will be plenty of opportunities on the other side of this exercise. See this Morning Notes for more thoughts on that view.
Should you be selling stocks now? This is a question that always interest me. It essentially infers that investors have not given any thought to the process of where to exit stocks. If that is true investors are in worse shape relative to managing their money than I believed. That is not from the view of should they be selling stocks, but in the view that they are not managing their money. Money management is a process that includes exit points. Knowing when to take your money to cash and then evaluating the process of how, when and where you will reenter positions is all a part of the process of managing your money in reference to the market, our risk tolerance and objectives. It is called discipline and it is what will make the difference of success and failure when it comes to your money. If you are not managing the process then it is time for you to take a crash course.
Oil was down 7.6% on Monday? Blame it on Greece? You can, but the reality of a nuclear deal with Iran is carrying more weight (my view). Iran has stock piles of crude ready to ship if the embargoes are lifted. Add that surplus to what is already out there and you can see the worries about the price of crude. The deal must be finalized by Tuesday and we will see how that unfolds moving forward. Throw in the renewed worries about China’s economic picture weighing on demand issues. How low does crude go? The break of support at the $56 level suggested support of $53.85, but that gave way intraday and now $51.75 is in play.
The dive lower in oil prices impacted Russia and RUSS was up 10.2% as the selling moved higher in Short Russia ETF. The ripple effect of lower oil prices are seen around the energy sector and other components impacted by oil prices. The consumer is a benefactor, but as seen in the February-March lows the spending impact did little to boost the economy. We will watch how this unfolds, but I would not keep my fingers crossed for a quick and easy solution to appear. Slower demand and more supply always equals price destruction… near term the nerves are getting frayed and that sparks selling regardless of the belief going forward.
It could have been worse! (Mom’s words every time I worried about bad news.) Trendlines are breaking on the downside triggering short term exit signals. The longer term trends are in view and breaks of those lines will only add to the downside risk going forward. Exit signs should be heeded and risk management made a priority. Tomorrow is another day, but the worries will likely still be present. One day at a time is the key… don’t get sucked into the speculation of what if’s, focus on what is, and maintain your discipline.