Morning Call: Stocks Set for Lower Open as Greece Fails to Form Government
Today is my first day back from vacation, so it’s time to dive back into the action! Most guys in my firm are embracing this down move as last week the Dots started to connect for further downside. I was stopped out of remaining longs from the Bahamas when the SPX broke 1390-1392, guys in front of their desk had more than enough time to press the keys. IBD went to Rally Under Pressure Thursday, and then Market Correction on Friday. Typically in the second quarter you get many misfires as it’s a historically tough time for stocks, especially after the gains we’ve seen from the first quarter.
Today we come in and the futures are down 7-9 handles right around support that sreated the April 10th bottom and then the March 23rd “Double Bottom”. Yesterday there was a quick and clean long set-up off this area for cash flow, but I’m not sure if today will be as easy! US stock futures are following European stocks lower as the inability of Greece’s conservative pro-bailout party to form a coalition government is causing some anxiety.
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The big area in the S&P is 1355-1357, which we can use a pivot this morning. A daily close below this area and it should set market in motion for more downside action. The 1340 level is a very talked about area now, but I guess it makes sense since this is a previous point of reference from February and early March. 1322 is the 38.2% Fibonacci Retracement level that would be a compelling area to hold moving forward.
What’s going on in Europe will create a Summer of Headlines!
The markets liked a unified front fighting deficits and promoting austerity, but the people expressed their displeasure with that path in the recent elections and it seems like Europe wants a mulligan. Austerity didn’t even start and now they will be fighting over the potential outcome. Overspending broke down the system, and now they don’t want the medicine the Doctor subscribed. Not sure where this leads, but it will create volatility moving forward. It could be a Summer of trading levels vs. Headlines, which can be very profitable if done correctly. Market timing and knowing your timeframe will be key. Strong Bottoms typically don’t happen in May–July, they usually can be trusted a bit more in August or October..
Yesterday some high beta names acted okay. The likes of Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG) will be on my radar to see if they can lead us off the lows. The banks will also be on my radar to see if they perk, and as is customary I will focus on leaders JP Morgan (NYSE:JPM) and Wells Fargo (NYSE:WFC).
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