Daily Market Update – June 10, 2015 (Close)
Lately there haven’t been too many mornings that you would be waking up to the futures indicating a stronger opening.
This morning, however, that was the case. Even though the gains weren’t very strong at that time, at least there was a chance to see some gains from the opening bell for a change.
The recent direction of the market, however, would take a fairly significant gain to erase some of the weakness that has been the theme over those past few weeks as the S&P 500 is now about 3% lower.
And that’s exactly what the market did in reacting favorably to word that there might be an agreement regarding the mechanism by which Greece makes good on its debt obligations to the IMF and ECB.
We’ll see about that.
What may still concern some technicians is that after a 6 month period of seeing higher lows as the market has undulated from 1862 to 2036, we are now sitting at a relative low that is lower than the last low.
That’s pretty esoteric, but for some that’s very important and would indicate that the trend of 3 steps forward and 2 steps back is being broken.
Most people don’t really care about such esoteric things.
Of course, the other pattern that has already been broken is the one where we see a 5% mini-correction every few months.
Sitting at a 3% lower level to start this day may have simply been a mid-point for that expected decline, although over the past few years those declines have come fairly precipitously, while this most recent decline has come in very small doses, maybe the same way a frog doesn’t realize that it’s been swimming in a pot very slowly being brought to a boil.
It continues to be difficult, however, to understand what the next catalyst to propel markets higher, even to the point of simply approaching its previous high, would be. While the next earnings season could bring some better than expected earnings results as the currency exchange issues haven’t worsened, as had been expected, that’s still a month away.
While awaiting that next earnings season there is still the prospect of a continuing overhang coming from uncertainty over when the FOMC will finally raise interest rates. It may just be that the best catalyst to move higher would be to remove that overhang, but to remove it due to good economic news and not because the economy is shrinking.
That overhang can be eliminated if the market sees good news as being good news.
If this morning’s Mortgage Applications data is any indication, the concern that rates may be going higher could spur economic activity and most agree that housing is a great place to begin any real economic expansion.
While we could use some good news, between now and next Friday, which marks the end of the June 2015 option cycle, my hope is that there is just no bad news so that the relatively large number of positions set to expire next week can either be assigned or rolled over. Right now, the burden of the past few weeks has made that more difficult, so we could use a little bit of a respite from the erosion that has been going on since the June cycle began.
Hopefully today’s good start to taking another few steps forward will still have some staying power to take us through this week and next.