Confusion Reigns

Equities start the day higher as confusion reigns. Actually maybe it’s just reigning in my brain because I’ll admit to being oddly confused. Let’s look at the big picture shall we? The Fed told us “we really want to hike rates this year but it might be a one and done situation”. Ok, that’s good, seems bullish to me. Transports continue to break down like Tiger Woods golf game so that’s definitely bearish. Sentiment is putrid (AAII bullish sentiment has now been below 40% for 17 consecutive weeks ) so that’s definitely bullish. Valuations are still expensive but I won’t outright say that’s bearish given how hard it is to call the top. Still, that’s not exactly good so we’ll lean negative there. The Rus2k and Nasdaq composite are threatening to break out to new all-time highs so yea, those go into the bullish camp. Volume is abysmally low (on a per share basis) but I don’t think that’s bullish or bearish it just is what it is. Donald Trump might be the most entertaining politician we have so I’ll put that one into the “I hope an asteroid hits the Earth” soon camp. I don’t know my friends, are you as confused as I am? I get that all these conflicting themes is the main reason we have no trend but have you ever seen a more forgiving market than this? Both sides, bulls and bears, have been rewarded for being patient.  On May 21, if you were a bear, and staring at new all-time highs in $SPX, all you had to do was wait 2 days for a huge selloff. On June 8, if you were a bull, and had just lived thru 3 ugly sessions in a row, all you had to do was wait 2 days for a huge rally. Should we be celebrating this market? One that forgives poor entry points in rapid fashion?  Maybe, I’ll admit I haven’t seen anything like this in a long time. New highs today? Wouldn’t surprise me, let’s find out.

After the open we did indeed get new highs! Boom shaka laka. Where you say? Well not in the S&P that’s for sure but the Russell 2000 and the Nasdaq both printed new all-time highs. Not only that Biotechs printed another new high. I love how Biotechs pull back a bit and everyone screams “yep, that’s the top” and a month or so later they laugh in the rear view mirror.  Why the morning rally?  I think a lot of people are off-sides, I really do.   All these sentiment indicators scream “I don’t like the market so I’m just watching for now” and when that type of view pervades a market it’s ripe to go higher. Did Greece get fixed?  Nope, we got one rumour saying there was going to be some kind of debt relief but it was summarily dismissed when the Eurogroup said “we got nothing here people”. Economic data was actually decent: CPI was tame and Philly Fed beat so we had that going for us. By lunch the two aforementioned indices were squarely on their highs and the S&P was doing it best to catch up, 2,119, up 0.9%. Did it feel ragingly bullish on the desk? Not at all, and I like that fact. No one talked about new highs and that suits me just fine.

The final hour saw more Greek headlines including this one from Dijsselbloem “Greece moving in direction of Euro exit”. I know this is nothing but posturing and putting the onus on the Greeks to come back to the table but I hope they actually are close to an exit. I just want an end to this story and so does everyone else.  Stay or go, pay or don’t pay, just end it, please. The sun will rise in Athens and Berlin and London and New York. The stock market will survive as will the bond market. The Greeks need to find a way back to prosperity so whatever path they take I hope they find it soon. We closed at 2,121, just 9 points shy of the record. So what should we expect tomorrow or Monday? Why a selloff of course. If the pattern of 2015 holds we will see lower prices within a day or two. Man I hope I’m wrong about that but we’ve been here before remember? (the end of May)  

Final Score:  Dow +100bps, S&P500 +99bps, Nasdaq +134bps, Rus2k +129bps.  

News Highlights:

We’ll end tonight with a look at what happens if you try and get your golf ball back from a crocodile.  Or is it an alligator.   Who knows, but what is this guy doing…seriously.

Have a good night.