Perfect Timing for a Turnaround Tuesday

The one constant through the entirety of the Greek/EU drama is that it remains a Very Fluid story!!  There are fresh reports this morning that Tsipras is willing to “reopen” talks with EU Commission President Jean-Claude Junker.  

These reports have sparked a reflex rally in Eurozone Equity markets and a follow through rally in the € which is trading through 111.00.  Will a deal get done?  We’ll believe when we see them all sitting at the same table signing docs but for right now the market is a hostage to the headlines.

Chinese markets have just had their 2 largest daily point swings since 1992.  Monday a higher opening quickly reversed resulting in a 10% intraday price swing as Chinese stocks settled more than 20% off their highs from 2 months ago.  Tuesday, after opening 5% lower stocks reversed to close at their highs of the day.  Another 10% swing.  China owes a big favor to Greece for dominating the front page headlines the last 3 days.

It was a “cringe” moment listening to their Government officials pleading with Chinese investors to “act rationally”….  .”C’mon man!!  Are you serious??  No wonder the revenue numbers from Macau are so bad.  Why bother to make the trip when the real casino is right on your bootlegged Ipad!!

Monday recap:  With Monday’s sharp decline, all Major Market Averages sans the NASDAQ have gone negative for the second quarter.  Market averages declined 2% to 2.5% and to say that there was nowhere to hide in equity markets Monday is almost an understatement.  

Market Internals were as negative as they’ve been for 2 to 3 years, possibly as bad as back to 2011, but I have easy access to that database.  Let’s look at a few highlights, or lowlights if you will:

The S&P 500, -2.1% at 2057.63 is poised to break its string of 10 consecutive

positive quarters with a close below 2067.90.   Next real support for the S&P 500 is in the range of the 200 day MA at  2053 and the March 11 closing low at 2040.

The DJIA, -1.95% at 17,596 is poised to post back to back quarters with a negative return should it close below 17,776.   I’m pretty sure this hasn’t happened since the 2008-09 time frame in the heart of the Global Financial Crisis.  The DJIA closed below both its 200 day MA of 17,677 and the March lows.  The January 31 2015 closing low is 17,165.

NASDAQ, -2.4% at 4958.47 posted its lowest close since early May, and although still sporting a +1.2% gain for Q2, this was a  +5.3% gain QTD just 5 days ago.

The Russell 2000, -2.6% at 1246.75, had gains for Q2 of +3.4% 5 days ago and is now at risk of a negative quarter with a close below 1252.77.

Down Volume was 25x Up Volume for composite trading of all NYSE stocks and 15x up volume for NASDAQ stocks.  I can’t remember this bad of a Dvol/Uvol day in the last few years.

Advance/Decline stats were equally as bad with declining issues leading advancers by nearly 10 to 1.

NYSE stocks had 350 new 52 week lows and 25 new highs.  As a point of reference, at the market lows of October 2014 we had 2 consecutive days with 600 new 52 week lows.

The internals point to a very oversold market on a very short term basis.  Had we had sharp declines for a number of days or weeks, and we weren’t only 1 week from all time highs on the NASDAQ and Russell 2000, we’d be set up for a sharp multi day reversal rally.

It is after all the last day of the second quarter, and there is some encouragement that a deal between Greece and their creditors can still be reached.   I think that’s unlikely unless they both put on ties and pinkie swear to be adults for a couple of days.

Regardless, we’ll start the day with a “relief bounce” and see if it can develop into a “relief rally”  

tanderson@mndpartners.com tjanderson56@gmail.com

Twitter: @TJAnderson1

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