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The S&P 500 has been in the sideway range between $2040 and $2134 since February 4 of 2015. This is 4.4% range if you count it from the bottom line of this side-way corridor and this is 5-month trend. Last time we had such long side-way trading in January - August of 2011 when S&P 500 index was moving in the range between $1250 and $1370. At that time it was 8 months of the side way action. The same as now, it was about 100-120 points range. The only difference, in 2011 it was 9.6% range and now it is only 4.4% range.
In August of 2011 the S&P 500 index exited this side-way corridor by crashing down to $1090 which is 20% from the high at $1370. I an not telling that we will have 20% correction down, however, taking into account that we had strong steady uptrend without any decent corrections on the S&P 500 for several years (since 2011), we should not disregard such possibility.
So far, it is difficult to expect a deep correction when volatility remains at low levels. The low volatility is the sign tat majority investors are still confident - they are not in panic yet.
Right now, still the majority of the S&P 500 stocks (279 stocks) are traded closer to their 52-week highs. See at SPX - High-Low Range Chart
On the other hand, since May 29, 2015 majority of the stocks from the NYSE Composite index are traded closer to their 52-week lows - they are clearly bearish. Today it is 1108 bullish (stocks traded closer to their 52-week highs) versus 1688 bearish (stocks closer to their 52-week lows). See at NYA - High-Low Range Chart
Last time such high number of bearish stocks on the NYSE was seen in October of 2014 when the NYSE composite index had 11% correctional move down.
We may say that the strongest US stocks which are listed in the S&P 500, DJI and Nasdaq 100 indexes still hold the market, yet, the rest of the market is quite uncertain. The Dow Jones Utilities index already declined almost 15%. The Dow Jones Transport is also 13% down and it does not look like any of this indexes are going to reverse up. This was not the case in 2011. At that time we had a side-way range trading across all indexes. Now, we have oil, gas, materials, utilities and transportation market sectors in a decline. Somebody may argue with it, but look at those indexes charts - the indexes covering these sectors are in decline and they are in decline not for just a couple of months.
I an not stating that the market will crash tomorrow. We are entering the summer season and we still could have "lazy" side-way trading. Yet, I think that should we have negative Greece output, it could trigger a strong correction. The decline on June 29th show that the market has a room to slide down and it does need high trading volume to do it - strong decline on that date did not generate strong volume surge - it tells us that there are not a lot of bullish trades ready to jump in and to stop a decline.
I agree. The kind of crisis that Greece is has the most potential to upset the financial markets than any other particular issue going on at the moment.
That said, I think they are on track to another adjustment of repayment terms which should forestall a crisis for another year or two.
Anything is possible in the markets. Greece probably shouldn't matter to US markets too much because it really isn't a big deal, but the market has sold off for stranger things. Back in October the S&P had a decent correction over Ebola... The main danger with Greece is someone took on too much risk. It is always possible a bank or hedge fund made a bad bet and winds up getting into serious trouble.
It can do more than trigger a strong market correction.
The key to watch is Italy and Spain. If this spreads to there then we are in real trouble as it will quickly go global due to French and German bank exposure in those countries.
There could always be some bank or hedge fund here that is taking big bets on Greece, ala MF Global.
I think if the Chinese market continues to collapse it will trigger a sell off here. Close to 3 trillion dollars in wealth have been wiped out, thats gonna impact US companies who do business over there.
I saw a "debt chart" recently showing Germany has the biggest exposure, followed by France, Spain and Italy. The US was about 9th place on the debt chart so I don't think it would rock the US but the top 3-4 could have trouble.
I saw a "debt chart" recently showing Germany has the biggest exposure, followed by France, Spain and Italy. The US was about 9th place on the debt chart so I don't think it would rock the US but the top 3-4 could have trouble.
I saw another one showing it was Germany, the U.S., and the UK.
It can do more than trigger a strong market correction.
The key to watch is Italy and Spain. If this spreads to there then we are in real trouble as it will quickly go global due to French and German bank exposure in those countries.
There could always be some bank or hedge fund here that is taking big bets on Greece, ala MF Global.
I think if the Chinese market continues to collapse it will trigger a sell off here. Close to 3 trillion dollars in wealth have been wiped out, thats gonna impact US companies who do business over there.
I'm not too worried about a peripheral contagion, but if you're watching Italy and Spain you should be keeping an eye or Portugal too.
Your point about China is a good one. Problems there are a lot more important than Greece.
I saw a "debt chart" recently showing Germany has the biggest exposure, followed by France, Spain and Italy. The US was about 9th place on the debt chart so I don't think it would rock the US but the top 3-4 could have trouble.
If a Greek financial collapse causes a cascade of failure in France, Spain, Italy, will it spread to UK and Germany? That would spread to the U.S. You could see a financial panic in the markets worldwide. I think that's the danger.
It's not Greece itself but the snowball it might push downhill. The markets can be fickle. A bid drop in the DJIA would probably set the U.S. economy back years because confidence is so fragile. We could be back to 2010 in a heartbeat.
The US stock market hardly took notice of this Greece thing. Down only 3% off all time highs. We've gone sideways for 7 months. Market is ready to break out to new highs over the next 2 or 3 weeks.
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