Where's the Market?
Beginning 6 p.m. last Sunday, the most asked question on Wall Street was “Where’s the market?”
In the wake of the Greek elections, that question continued to be asked throughout the day on Monday. Whether you chatted live with hedge fund managers, traders on the desks of investment banks, or eyed the Twitter sphere and business television, I found many to be disappointed that the S&P 500® Index (SPX) was not significantly higher (Figure 1.1). Well I ask, “Why the disappointment?”
The markets repriced higher last week on the expectation that the Syriza party would not capture enough votes to make the Greek exit a possibility. I disagree with those disappointed yesterday; I am actually encouraged that last week’s gain was not corrected, and several internals within the market looked good:
• Strength was exhibited throughout Monday in small caps and technology.
• The VIX traded down to 18.32, its lowest level since May 8 and below this quarter’s 20.22 average (Figure 1.2)
• The Dow Jones Transportation Average closed back above its 50-day moving average for the first time since May 8 (Figure 1.3)
Over the next few days, the market will digest an FOMC meeting, Friday’s Rome sit down between Europe’s “big four,” and the U.S. Supreme court’s ruling on Obamacare. Investors should view a close below last week’s 1306.62 low as a near-term indicator. As the quarter closes out, remaining above 1306.62 will be supportive as we begin Q3 and raises the likelihood that a bottom was established with the June 4th 1266.74 low.
Figure 1.1 S&P 500 Index (SPX) Year to Date
Figure 1.2 VIX Quarter to Date
Figure 1.3 Dow Jones Transportation Average Year to Date