Greeks are climbing an Economic Mount Olympus and the Chinese market could be sitting on the edge of a cliff.
Presently, the US news has pushed the trader investor into missing the biggest news item that will have a large effect than the referendum this past weekend in Greece. The news has cycled over and over on how Greece is voting on accepting austerity proposals from basically Germany and France. Greece owes them a total of around 170 billion dollars. Other countries since 2010 have contributed billions too, but as they are also in default and collateralize d their debt with junk bonds pushed into the European Community, in the short term they can wait to see how to follow if Greece takes on this arduous trek to a new economy. It is not like the news pictures it as a jump, a fall from Europe, but more of a political 1 foot forward two steps back until Greece commits to their future through their own currency. They are climbing Mount Olympus not jumping from a cliff.
Looking at the pullback in the US markets, I would attribute the long term direction more to what is happening in China. China is the 800 lb Gorilla sitting on the financial markets. The Bank of China has just dumped 20 billion dollars into the market today, and the total loss to the Chinese markets this past month is in the Trillions of Dollars. Much more than the combined values of all the PIGS debt. This 25% correction in the market has not exhausted. If there is any indication in past major corrections their could be a 50% correction. I think the BOC will definitely step in with more support and extend leverage to stock holders but this is setting a very bad precedent in the market. The market clearing process of selling too much, moving to an oversold condition opens up the opportunity for new money in and inefficient, non employee-centric businesses to be cleaned out.
Trading Plan – Stay away from overnight holding of equities, short term trading only.
S&P500 emini futures showing support on the 200MA moving average. Buyers and sellers had a capitulation before the move down showing seller exhaustion. Strong buy on today’s market with next major support at 2032, 1009 then 1957.50 News out of China could be big and set off a few international market makers that might be shorting. Watch for a break above 2100 and then some consolidation. If Greece folds and the BOC covers the market, then we could rally through to August.
Gold, the Catastrophe hedge is weak.
There is a shift coming in the markets, and the risk off trade is slow, the catastrophe hedge GOLD is weak, Silver even weaker. Copper had an almost 4% change in price today to the sell side. Mortgage rates could be going up in the US in September, probably to be delayed to November or a slow sales moving month. For each half percent, an estimated 200,000 home buyers will be knocked out of the market. Home prices also correct when interest rates go up, so all these new buyers afraid of getting a higher rate are buying at the top of the market…..
Greece is going to have to climb mount Olympus to get their new economic fire and it is going to be a long hike.
The Sky could be falling, the referendum on July 5th is adding some volatility to the US and international markets.
We are sitting on the brink of some amazing changes that could be brought about by the Exit of Greece, from the Euro. Iceland previously held a referendum(in 2011) asking the people if they wanted to guarantee 2 Icelandic banks . European governments put pressure and all types of doomsday propaganda about how Iceland will loose its standing in the world. The vote was close to 60% against the guarantee. Iceland moved out from the pressure of the banks and let the business fail but kept their integrity and Iceland has been doing well since then.
It is a courageous step in the climb, and the pressure the Greeks are under both physically and psychologically must be huge and the hangover for the party in the streets just as big. In this, we might see some of the abhorrent corruption of our banking systems corrected. In the US, it seems we have not learned from our mistakes and have let the banks become our political masters, controlling our commerce, our industry and future taxes.
I remember in the 70’s when we had anti monopoly laws and policies, we broke up the “Bells”, we monitored the banks, we had mistakes but we had a sense of business that was to serve people, not as a business entity treated like a person that can not be held accountable. No banks or bankers have been charged and held responsible for the instruments they sold back and forth that created the largest transfer of wealth from middle class to the wealthy. The 2008 Financial Crisis will be small compared to what is in store for the markets in the futures.
As each of these begin to unwind, the Grexit, the Italian, Portugal, Spain exit that could follow. Eastern European countries unwind and their debt skyrockets, the baby Grexit in the US with Puerto Rico, Cities unable to pay their pensions with out issuing more debt(bonds) and of course the Ponzi of Treasuries and Bonds as the world looks for a source of safety and to take risk out of the markets.
The changes could be fast, the market could clear these fraudsters out, there could be a new start for many countries and cities. The fear of such a choice is often larger that the actual consequences.
We shall see…..
So What is your PlanB?
Remember to always manage your risk first. If you don’t have money to burn, stay out of these markets.
Money Maker Edge™
Summer trading the S&P500 emini futures, support was hit today and the bounce could send the market to new highs.
As mentioned in last weeks article, the S&P500 emini futures have previously pulled back to find support in the last week of may and the first weeks of June. Today, we hit the support of 2068.75 in the overnight session and have bounced past the Point of Control at 2081 where the buyers are moved back in to control.
In a recent talk with day traders in Newport Beach. “Trade what you see, remember this is a widely held market and every time there has been a pullback or minor correction, the crazies will come out saying the sky is falling. The sky will fall when we have a 10% or more correction. Until then play the direction of the market. Trading is about being nimble.” Joel Wissing
This pattern where we have a double top or head and shoulders pattern gives us a small pullback or minor correction (less than 5%) has proven to be a continuation pattern in this widely held market.
Summer trading plan on a daily chart – major support has held.
The S&P500 reversal off of support at 2067.25 where sellers capitulated and buyers moved in is a key area of support. If you notice the buyers moved in and brought price above the 50MA at 2097 showing strength in this move up. This means the short term bullish trend is still in tact.
We have entered the next price projection zone (pinkish box) and are looking for it to move up, consolidate, and then break through the top either in the last quarter of the year of before the first week in August when we normally get a minor correction.
Downside projection this week was for the 2067.50 area, and the market is not showing signs of reversing off of today’s bullish move. If there is an outlier (read this from December 2014) that causes sellers to leave their widely held positions the next area to be tested will be 1960 for a full correction where we have an open gap.
Warning: Summer time trading can have very low volume and quick volatile movements. Always manage your risk first and don’t trade unless you know what you are doing. Only you can be responsible for your income, wealth and freedom!
Weekly to Daily Summer Trading Plan June 2015
“Traders use a trading plan to set their trades, risk management and execution with the nimbleness of trading the direction of the market.” Joel Wissing Money Maker Edge™ Trading Course.
Weekly to Daily to shape your perspective of the market. Sequencing is one of the most important steps for a trader to learn. How one sets up their trade plan is how you create your opportunities in the market.
The weekly chart is very consolidated at the top of the market where it has been hovering trying to make it’s way to new highs. 2074 the previous swing high on a move up is the new support on this move, as noted by the red line.
The sellers had a slight uptick in volume coming close to the average monthly volume of 5259k. An increase over the previous month. Still watching as the volume spikes are decreasing.
The Range is very small at 29.75 points for May. This type of small range occurs normally before we have some volatility and a break out in a market. Last years summer also started with this type of small range and then broke out in August. We might see the same unless an outlier pops on to the scene. Greece exit, could be a big mover of the markets, or a second tier bank failure for non payments of debt. Remember in a widely held market supported by quantitative easing we will see these periods of consolidation, low range days, weeks and months and then a small correction which acts like a spring to bring in the volatility to break through new highs. Here is the article about some of the pressure on the 2015 markets.
Comparing 2013 – 2014 weekly charts for Summer Trading 2015
Comparing the summer price volatility, range and volume to get an idea of price action for Summer 2015 trading. Year on year the average volume and the range has decreased from 2013 to 2014. you can see this on the first histogram on the chart. Although the change was less in 2014 than 13 we could see the same if no outliers move this market.
The range also dipped significantly during this period with a spike into August. 2014 summer trading range was much tighter than 2013 on less volume. The first week of August seems to bring in a rush of volume and an increase in the range, as you can see in the dip from August lasting 2-4 weeks from both summer sessions.
Again, during the 2014 summer we were in full swing quantitative easing so the market levitated it’s way up. QE is the fashion and we could see it enter in other countries too. Don’t forget also about the Greeks not making payments and asking for extensions. It could put pressure on the euro, boosting the Dollar and extending foreign demand. Where this will take the market, no one knows as usually stocks and the dollar index has a reverse correlation, but has acted the opposite in recent months.
Trade what you see, do your own analysis, and educate your self. No one can be responsible for your trading except for you. Be nimble, and always manage your risk first.