Tuesday recap: It’s been a very familiar pattern the last few weeks that after a modestly higher opening, stocks rally a bit further, making highs of the day in the mid to late morning, then drift lower for 2 to 3 hours before stabilizing into the close. Tuesday was a textbook example.
After hitting resistance at the 2130 level less than an hour into the day the S&P 500 drifted lower until just after lunch before recovering to close fractionally better than unchanged, +0.06% at 2124.20
The Russell 2000, +0.25% at 1295.80 and NASDAQ, +0.1% at 5160.09 eked out new closing highs for the third time in the last 4 days, despite the market feeling seeming to be in “suspended animation” within its trading range. There have been numerous comments in daily trading columns of late on the increasingly narrow trading ranges for market averages, both intraday and for the entire second quarter.
Eventually we will break out of this tightly wound range and without entering the “twilight zone” of predicting which way the market will break, there are a couple things to keep in mind.
Typically, the longer a stock or market is “stuck” in a tight trading range, the bigger the move once it breaks out. Additionally, failed breakouts do happen, and often result in substantial move in the other direction. It can be very painful to get “caught” buying or selling a false breakout(down) and accompanying volume is often a critical factor.
My “guess” is that lots of traders have been waiting a while now for markets to get out of this range, and the odds that too many of them jump on an initial move that doesn’t follow through is pretty high.
Around the Globe:
The Shanghai market has gained its footing a bit after a 13% decline last week. At least in the immediate term, Tuesdays was a reversal day where early declines of 2% to 3% were turned into gains of 4% by day’s end. The Chinese markets still sport hyperbolic gains the last 6 to 12 months, but do not underestimate their ability to “manage” their financial markets as well as they have “managed” their economic data during the contraction of the last few years.
The Japanese Nikkei stock index has traded to an 18 year high surpassing its pre Internet bubble level from 1999-2000.
Update on Greece!! Headlines out of Europe just before 6:00 AM are that Greek Prime Minister Alexis Tsipras has said that Greek creditors (formerly the Troika) have not accepted the latest budget reform proposals from the Greek government.
Eurozone markets and US Equity Futures have traded lower in response to these reports, but This is a Very Fluid Situation. Don’t be surprised to see conflicting headlines and news reports on this throughout the morning.
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