Weekend Update – The Greek Vote

Last week was fairly hectic but we had a good handle on it. We had the gap down Monday, rallied into Wednesday and sold off Thursday. That was overall just as we expected and any strength was short opportunity. This week will be decided by the Greek vote. The other issue that has flown somewhat under the radar is the crash going on in China.  However, unless we have a massive 30 or 40 point up day, the charts look bearish.

Edit: It looks like the “No” vote has won as of 4:30pm EST (61% to 39%). Now we still need to be on the lookout for the possibility of some type of deal as the week progresses. (I put the text in bold of what might be the likely scenario tomorrow.
)Here are some links to the Greek voting results and the emergency measures in China.
– greece.greekreporter.com/2015/07/05/greece-vote-greek-referendum-results-live/
– theguardian.com/business/live/2015/jul/05/greeces-eurozone-future-in-the-balance-as-referendum-gets-under-way–eu-euro-bailout-live#block-559970d9e4b00bdd27707dd6China:
– reuters.com/article/2015/07/05/us-china-markets-outlook-idUSKCN0PF0DH20150705?feed&feedName=businessNews

On the Daily chart, we have a small bear flag formation. A break of 206.50 would bring us to test the 205 low which would likely not hold. We would then be on the way to the 61% target at 203.

For tomorrow, a gap up (with good Greek news) to 209 or so could still be a good short, but strength over 210.5 should make bears very carious. If we gap down (with bad Greek news) it would not surprise me if we rally some into the close because some of that news has already been priced in.

One of the biggest reasons the bull market has continued, even without QE, has been due to corporations picking up where the Fed has left off.  As you can see in the chart from Bloomberg, buybacks are literally off the chart.  The problem is with the heart of earnings season a few weeks away, many large corporations are in a five week black out period prior to their earnings release. This has undeniably contributed to some of the weakness we are seeing.  The heart of the overall blackout period will run through next week.
This week as stated above, Greece will be the prime focus with China in the background. We also have FOMC minutes on Wednesday, where the focus will be on any hints about a rate increase.  Even more importantly Janet Yellen will be speaking on Friday, so look for some extra volatility at lunch time.
My long term models are bullish.
My medium term models are bearish.
My short term models are bearish.- Trader Tony