GREECE CHINA FED.
OK, so the Greek crises rages on and i believe many savvy traders made a lot of money trading these past volatile weeks.
With Greece, it is a news driven market. Should a deal be done, markets will go up, and should they drag the talks further, European stocks shall decline by a few percentage points. In that case, some buyers will come in as they would view that as a buying opportunity. However, keep watching the situation closer as there is a possibility of a GREXIT causing a major market disruption and price dislocation as the market grapples with discovering the right equity prices to factor in the exit. We have never been here before, were a major European nation considers leaving the currency union.
Having said that though, i do not see an immediate Grexit in these coming weeks or months as we have observed the tonality of the Greek president changing, becoming more friendly. Though rating agencies and analyst have raised the probabilities of a Grexit occurring, that change in tone, and the reality of a financial Armageddon gripping the Greek people in the past weeks, i expect the Greek leaders to retreat from their anti austerity rhetoric. Not that they will concede on everything but i expect a compromise that will lead to the deal. Judging by the robust moves from the bottom in the DAX, the sentiment is that informed money thinks they will be a deal signed soon.
China is another cause for concern with their market plummeting over 40% in a matter of days. However, if you put that into perspective, China is still up for the year by over 40%. Obviously the people that got burned are the inexperienced and over leveraged retail investors who got into the game late. Surely the Chinese government ids to blame for encouraging these retail investors in the first place. I always say that financial or market education is very important, more important than just investing your savings into a vehicle you do not understand. At best, these Chinese traders can be described as punters, gamblers. They do not look at fundamentals or even historical data to make sound judgements of markets.
our friends at the Fed feel very neglected lately as they have been relegated to the back seat of market movers. Friends, lets not forget their looming rate hike, which i believe will be next year, maybe later next year. The global economic environment is getting uglier by the day with spill over effects likely to affect the US economy. Facing a squeeze, i suspect the Fed will further delay the hike.
So with all these factors at play, the fear in the market is at an all year high, with the Vix almost touching 20 last week. Maybe this is the time for that 10% correction, or maybe 6%, who knows? If we get that correction, we might recover, but i now doubt if we will break through that 18 200 on the Dow. But then again, this is my stance for now, it may change in the next coming weeks as we keep watching the market. Trade well.
