Mr Market is off to the races this morning on news that Germany has relented its hard line against extending additional funding to Greece, assuring the Greek ability to pay its July bills. Excited investors drove the Dow up 135 points on the open, with most of the major indexes following suit, printing nearly 1% advances. No word yet on whether or not this new credit extension will re-assure the bond markets that the Greek bonds are "money good".
But in any event, this action by the Germans has caused the inventor world to to assume that all is now well and it is Risk On again, and not to worry! Of course, this news came prior to the open of the U.S. market, which is now in the process of digesting the Case Shiller and the Chicago PMI report. The headline of the Case Shiller report says pretty much all that needs to be said......
"This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.". On the other hand, the Chicago PMI was much more subtle.....
"Chicago PMI Plummets from 67.6 to 56.6, the Biggest Monthly Drop Since Lehman Bankruptcy".
As the little birthday boy exclaimed......"there has to be a pony in here somewhere!"
The pony metaphor is explained by the fact that Mr Market has pulled back some 60 Dow points from its high, and is currently trading up 75. The SPX is up 7.3 and the rest of the indexes are all higher, up around 0.50%, with the Transports lagging, up around 0.30%. Oil opened higher, and is currently trading up 2.0 at 102.56, and Brent is also higher, trading up 1.5% at 116.38. Gold is a few ticks higher, trading 1536.90 and Silver is trading higher at 38.47. Copper is also higher, trading 4.20.. The soft commodities are mixed, with Coffee again leading the way, up1.12%
The Euro surged on news of the one hundred and first Greek bailout, trading 0.75% higher at 1.438, while the Dollar continues to give up its recent gains, trading off 0.5% at 74.60. U.S. Debt though does not seem to be signing onto the "Risk Off" strategy, . trading higher the morning with the Note at 3.06% and the Bond at 4.22%. Anyone want to bet we see sub-3% 10 year paper this week?
Please note the 2 changes in the Momentum Change index indicators. The Euro has flipped to a Buy as of 5/27 (they must have seen something coming last week), and the Dollar also changing direction, with a new Sell signal on 5/27. Like always, these signals last until they change.
No new trade ideas. Some of the indexes are at or are nearing neutral, with a possibility of a change this afternoon if the market continues its strength into the late afternoon. There was increase interest in the buy side late last week as evidenced in the strength of the advance/decline action and up/down volume.
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However, that interest in the Bid has already begun to fade. We will see how this plays out this afternoon.
In the meantime, the sidelines are the place to wait.
Best To Your Trading!
Bill
