Check out the video below for a full recap of this week's options outlook:
Scoreboard: Last week ended red for indices, but Thursday was actually bullish. The indices were tested hard especially the small caps which were down almost 1 percent. But then the indices all recovered to close well off the lows. The weekly candles show that most indices are at prior bounce levels to provide support soon if left alone (Greek headlines aside).
So, headlines aside, market ranges continue to be the same for the last few weeks: A well established neutral zone, support below and resistance above. For the last few weeks we've been paying special attention to the battle in the small caps and this week this will be even more important. This week, the easier path for the small caps is lower. Caution is advised. The markets rallied off the jobs data as it was more negative than positive but then attention quickly returned to the possibility of a 'NO' vote in Greece over the weekend.
How will the Greek event / headlines impact U.S. trading?
This is a binary event that is almost completely irrelevant to the fundamentals of U.S. companies' earnings. So the direction of the move is a coin flip. A 'YES' vote would have likely been well received and caused a relief rally (short-able). Instead, the 'NO' vote is likely to cause confusion with usually initiated a sell-off in the Sunday futures. The depth of the sell-off depends on the follow-up media coverage. So far, the Monday reaction seems to be under control.
Sentiment last week noticeably shifted negative. so this can be a good thing. Why? When everyone in the car is watching out for an expected accident, we tend to put on seat belts & be more aware, so:
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- Even if we don't avoid it, the damage is minimal as precautions have been set in place.
- Apple AAPL (market leader) hit the wall of resistance but its Thursday performance mid-day played a large role in saving the day. It will need to continue its leadership role into the volatile week at hand.
- Small caps: They are vulnerable this week and losing them would mean losing the leader of the last few weeks.
- Rates: After the Greek headline wanes, rising rates will weigh heavily on the bull thesis if the breakout continues. For now yields are under pressure due to investor rush into relative safety of the U.S. and German bonds.
- Wild currency fluctuations can cause havoc in equity markets
- Lack of conviction and follow through
- China markets are under pressure but with still more potential downside
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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