My thought process that this would be a "quiet" week as everyone waits for Greece election/FOMC meeting early next week has been dead wrong. The intraday volatility has been extreme with multiple days of 30 point S&P swings including yesterday. Yesterday's session was interesting in the fact that even as the S&P 500 index went to intraday highs, the volatility index did NOT come in, and U.S. Treasuries stood firm all session. When deciding between the views of the stock and bond market, one usually wants to err with the latter – especially in the longer term. By late yesterday when the market flopped once again, we can see that divergence was important.
Bigger picture however, this wicked volatility has not led to any movement the last 5 sessions as the market is churning people to pieces and based on my reads around the interwebs, causing some frustration. We are now in day 9 of this rally + sideways action. On the positive side the market is 'hanging in there' and while volatile not giving back the lower end of this range around 1305. That would fit into a thesis of a 'right shoulder' forming of an inverse head and shoulders formation. Of course this would require a move over the 1340-1360 range to confirm it to be the path forward. On the negative side, the market is 'hanging in there' and not advancing. A new higher high has not been achieved even as we see the S&P 500 run up and tease market participants during it's daily whipsaws. More concerning from a purely technical aspect is a lack of leadership. The only group I see any life in is utilities – that's not exactly a growth area. A lot of the glamour high beta stocks are either flopping around or faltering. Commodities remain largely lost in space as we received word yesterday from China that GDP growth for the quarter might not even reach 7%.
Of course all eyes remain on Europe and frankly there seems to be complacency as Spanish and Italian bonds once again are blowing out. Last time this happened in fall 2011, it led to the exit of Mr. Berlusconi and insertion of Mr. Monti. And the market was in freefall. However at this point, the view seems to be no matter what happens either the ECB or Germany will eventually bend, hence why sweat it? Hard to blame that view since it has been accurate the past 3 years but still it's an interesting game of chicken. "Eventually" doesn't need to be next week….
Interestingly there are no polls allowed in Greece two weeks prior to an election so everyone is in a fog on what is going to happen. Even more amazingly we are all sitting here waiting for an election in a country the size of Vermont.
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