Stock Market Averages Sharp Rally off Near Term Support

Wednesday recap: Equity markets posted their strongest rally in just over a month as major market averages gained +1.2% to +1.4%.

Market internals were respectable as UVOL was better than 4x DVOL and advancing issues led decliners by 2½ to 1.

Oil rallied 1.5% as it continued to build on its 10 week recovery rally with WTI holding the $60 level. Oil has now rallied over 40% from its January and March lows, without the aid of any supply cutbacks from OPEC.

Bonds continue their Global “mean reversion” move and early this morning the benchmark German 10 year has sold off a bit further to yield 1.01% while the US 10 year Note has hit 2.50%.

So What has Changed? Nothing of substance really, although there has been a slightly more conciliatory tone to the Greece negotiations between German PM Angela Merkel and Greek PM Tsipras. Frankly, I feel both the positives and the negatives of the Greece/Eurozone dilemma have been wildly overplayed by financial markets and more importantly, political leaders in the area.

Check your calendar!! This is not your 2011 Greek Exit Crisis. 2015 is in reality “dog years” from 2011 in terms of the significance of the Greek participation to a healthy Eurozone economy.

From a technical perspective, the S&P 500 held a key support level Tuesday when it rallied off 2075 half way through the session. Thus was at least the 4th or 5th time the S&P 500 has tested the 2075 level intraday and held the last 2 months.

Additionally, the Russell 2000 regained the 1250 level yesterday while slightly outperforming the other major market indices. Keep in mind we’ve had dozens of sharp 1 day market moves this year with zero follow through the following day.

If there has been an Extreme in this market, it’s been the Extreme inability of Bulls and Bears to build momentum after what on the surface are potential reversal days or near term technical breaks up or down.

The Early Line: While we’re discussing lack of follow through, don’t expect an “out of the blue” resolution to the Greece/Eurozone dilemma despite the happy talk early yesterday. For nearly 6 months now, the Greek drama has been the ultimate “Indian giver” where 1 days talk of promise, has yet to be followed up with specifics of progress toward a resolution.

There is good news out of China overnight, as their May Industrial Production report showed an increase of +6.1%, beating market expectations, and a definite improvement from the last few months.

Retail Sales at 8:30 AM!! No Excuses This Time!!

The US Market will, and should be heavily focused on the May retail sales report at 8:30 AM. Consensus is for a +1.1% reading overall, and +0.7% ex autos. This should be the strongest retail sales report this year, and no doubt the market has been yearning for more robust data from the consumer to “kick in” after a the first 3 to 4 months of the year were held back by the west coast port “slowdown”, and winter weather.

Yes, it’s a real shocker!!! the Midwest and Northeast have winter weather during the December to March time frame. Seriously, this retail sales report comes with no excuses. Auto sales have clearly been brisk by any standard, and consumer installment debt has up ticked in the last couple months.

tanderson@mndpartners.com tjanderson56@gmail.com

Twitter: @TJAnderson1

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Daniel Reply

Thank you for this enlightening article.

Daniel

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