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Greek Drama Makes New Investments a Gamble

The cloud of Greece’s financial woes limited trading on U.S. markets on Friday, and most of the major indices closed virtually unchanged. Creditors expect a last-minute deal to result from Germany’s pressure to “get it done.” But on Saturday, the Greek government said that it has turned down all deals and will put the issue to a vote in the form of a referendum with a recommendation to citizens to vote “no.”

However, despite the response from Greek officials, investors were still optimistic that a deal could be hammered out over the weekend. But it is only a few days before another payment is due and there is little hope that it will be accomplished. On Saturday, eurozone ministers rejected Greece’s request to extend debt negotiations, and the Greek government in effect has “broken off the process,” according to the leader of the Eurogroup finance ministers.

In U.S. markets, biotechnology stocks were lower as a result of profit-taking. The iShares NASDAQ Biotechnology Index (ETF) (IBB) fell 0.8%. But financials rose 0.3%, consumer discretionary was up 0.4%, and industrials gained 0.2%.

Rebalancing of the Russell 2000 led to nearly 2 billion shares being traded on the NYSE and a spike in the last minute of trading, but the small-cap index still closed lower by 0.3%.

As a result of the disappointing talks in Europe, the euro fell against the U.S. dollar, closing down 0.5% at $1.1147. Brent crude rose 0.1% to $63.26 a barrel, and gold was unchanged at $1,171.40 an ounce.

On Friday, the Dow Jones Industrial Average rose 56 points to 17,947, the S&P 500 fell 1 point to 2,101, the Nasdaq lost 32 points at 5,081, and the Russell 2000 lost 3 points at 1,280.

The NYSE’s primary exchange traded 1.8 billion shares with total volume of 4.3 billion. The Nasdaq crossed 2.8 billion shares. On the Big Board, decliners outpaced advancers by 1.3-to-1, and on the Nasdaq, decliners led by 1.4-to-1.

S&P 500 Chart
Click to Enlarge

The S&P 500 has been trading in a narrow, flat range for most of 2015. Support is at 2,095 and resistance is at 2,120. In the middle of the bands of support and resistance is the 50-day moving average at 2,106.71.

MACD is falling and has been in a non-confirming mode for all of this year, failing to make a new high as the index jumped to new highs. And now MACD is turning down.

Nasdaq Chart
Click to Enlarge

The Nasdaq is in a bull channel, but as time passes its fragility increases. Note the non-confirmation on the MACD that matches the same failure on the S&P 500. Initial support is at the 50-day moving average at 5,047.84.

Conclusion

News from across the pond once again dominates the markets as the Greek tragedy is turning into a Greek wrestling match. It seems Greece’s communist-led government refuses to do what is necessary to pay back its debts to the European Union. It is clear that the situation is rapidly evolving into a slugfest with the Germans versus the Greeks.

Most would conclude that Greece is bound to lose in such a battle against Deutschland, but don’t be too sure. The Germans are not at as much of an advantage as many would think. If Greece pulls out of the EU, the euro will probably skyrocket, putting Germany at a disadvantage as their exports rise in price, no longer held down by the weak economy headed by Athens.

Watch and wait. This drama is far from over. Any new investments, except those in extremely discounted value stocks (see the Trade of the Day), are a mere gamble.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/06/daily-market-outlook-greek-drama-makes-new-investments-a-gamble/.

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