Markets Rally Sharply From Oversold Conditions

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Includes: CVY, DBA, DBB, DBC, DXJ, EEM, EFA, EPI, EWA, EWC, EWG, EWU, EWY, EWZ, FXE, FXI, FXY, GDX, GLD, GREK, HYG, IEV, ITB, IYR, IYT, KBE, LQD, RSX, SLV, SPY, TLT, USO, UUP, XLB, XLE, XLF, XLI, XLP, XLU, XLV, XLY, XRT
by: David Fry
Summary

Germany’s Angela Merkel was willing to make concessions to Greece.

This bull market over the past 7 years has reliably seen healthy dip-buying.

Nevertheless, for now, the trading range continues among most stock averages.

The Greek news is "kaka" for now but these short squeezes will move on any excuse even if the news is later denied.

Stocks rallied right from the opening bell first on a rumor, later clarified, that Germany's Angela Merkel was willing to make concessions to Greece.

As indicated later, Germany clarified by stating per Reuters, "Germany will only accept a cash-for-reform deal between Greece and its international creditors that has the approval of all three lending institutions".

Wall Street embraced the notion the two sides were talking (again) and that's about it. It's not the first time there have been negotiations, and none have been successful.

Kicking the can down the road and nursing the patient along remains the primary strategy.

Perhaps of greater significance was markets had reached critical support levels as important moving averages, 100 & 150 day variety, had been tagged. This is significant since this bull market over the past 7 years has reliably seen healthy dip-buying at these levels. Further the trusty McClellan Oscillator (NYMO) had reached short-term oversold levels (-60) and Fibonacci Indicators also showed retracement targets being met. Therefore, those that needed to defend their book took these conditions and news backdrop to rally.

Bulls also pointed to sharply higher oil and energy prices as inventory data from EIA showing a nearly 7K drop in crude inventories. (Bulls chose to ignore increased OPEC production.) This ramped the energy sector overall.

Nevertheless, for now, the trading range continues among most stock averages.

Thursday's Jobless Claims, Retail Sales, Import & Export Prices and Business Inventories could allow or not bulls to build on Wednesday's gains.

Leading market sectors higher included: Most everything.

Leading market sectors lower included: Bonds (NASDAQ:TLT), China (NYSEARCA:FXI) and little else.

The top 20 market movers by percentage change in volume whether rising or falling is available daily.

Volume increased on the rally and breadth per the WSJ was positive for a change.

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6-10-2015 6-02-19 PM diary

Stocks rallied right from the opening bell first on a rumor, later clarified, that Germany's Angela Merkel was willing to make concessions to Greece. As indicated later, Germany clarified by stating per Reuters, "Germany will only accept a cash-for-reform deal between Greece and its international creditors that has the approval of all three lending institutions".

Wall Street embraced the notion the two sides were talking (again) and that's about it. It's not the first time there have been negotiations, and none have been successful. Kicking the can down the road and nursing the patient along remains the primary strategy.

Perhaps of greater significance was markets had reached critical support levels as important moving averages, 100 & 150 day variety, had been tagged. This is significant since this bull market over the past 7 years has reliably seen healthy dip-buying at these levels. Further the trusty McClellan Oscillator (NYMO) had reached short-term oversold levels (-60) and Fibonacci Indicators also showed retracement targets being met. Therefore, those that needed to defend their book took these conditions and news backdrop to rally.

Bulls also pointed to sharply higher oil and energy prices as inventory data from EIA showing a nearly 7K drop in crude inventories. (Bulls chose to ignore increased OPEC production.) This ramped the energy sector overall.

Nevertheless, for now, the trading range continues among most stock averages.

Thursday's Jobless Claims, Retail Sales, Import & Export Prices and Business Inventories could allow or not bulls to build on Wednesday's gains.

Leading market sectors higher included: Most everything.

Leading market sectors lower included: Bonds , China and little else.

The top 20 market movers by percentage change in volume whether rising or falling is available daily.

Volume increased on the rally and breadth per the WSJ was positive for a change.

SPY 5 MINUTE

SPY 5 MINUTE

SPY DAILY

SPY DAILY

SPX WEEKLY

SPX WEEKLY

INDU WEEKLY

INDU WEEKLY

RUT WEEKLY

RUT WEEKLY

NDX WEEKLY

NDX WEEKLY

XLB WEEKLY

XLB WEEKLY

XLE WEEKLY

XLE WEEKLY

XLI WEEKLY

XLI WEEKLY

XLF WEEKLY

XLF WEEKLY

KBE WEEKLY

KBE WEEKLY

XLP WEEKLY

XLP WEEKLY

XLY WEEKLY

XLY WEEKLY

XRT WEEKLY

XRT WEEKLY

XLV WEEKLY

XLV WEEKLY

XLU WEEKLY

XLU WEEKLY

IYT WEEKLY

IYT WEEKLY

IYR WEEKLY

IYR WEEKLY

ITB WEEKLY

ITB WEEKLY

CVY WEEKLY

CVY WEEKLY

LQD WEEKLY

LQD WEEKLY

HYG WEEKLY

HYG WEEKLY

TLT WEEKLY

TLT WEEKLY

UUP WEEKLY

UUP WEEKLY

FXE WEEKLY

FXE WEEKLY

FXY WEEKLY

FXY WEEKLY

GLD WEEKLY

GLD WEEKLY

GDX WEEKLY

GDX WEEKLY

SLV WEEKLY

SLV WEEKLY

DBB WEEKLY

DBB WEEKLY

USO WEEKLY

USO WEEKLY

DBA WEEKLY

DBA WEEKLY

DBC WEEKLY

DBC WEEKLY

EWZ WEEKLY

EWZ WEEKLY

RSX WEEKLY

RSX WEEKLY

EPI WEEKLY

EPI WEEKLY

FXI WEEKLY

FXI WEEKLY

EFA WEEKLY

EFA WEEKLY

IEV WEEKLY

IEV WEEKLY

EEM WEEKLY

EEM WEEKLY

EWA WEEKLY

EWA WEEKLY

EWC WEEKLY

EWC WEEKLY

EWG WEEKLY

EWG WEEKLY

EWU WEEKLY

EWU WEEKLY

GREK WEEKLY

GREK WEEKLY

EWY WEEKLY

EWY WEEKLY

DXJ WEEKLY

DXJ WEEKLY

EWZ WEEKLY

EWZ WEEKLY

RSX WEEKLY

RSX WEEKLY

EPI WEEKLY

EPI WEEKLY

FXI WEEKLY

FXI WEEKLY

NYMO DAILY

NYMO DAILY

The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

NYSI DAILY

NYSI DAILY

The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

VIX WEEKLY

VIX WEEKLY

The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Closing Comments

All there is to say is the indicators worked as advertised. The Greek news is "kaka" for now but these short squeezes will move on any excuse even if the news is later denied.

For trend-followers the only way to continue forward is to understand what is behind the trend.

Should that change, like Fed policies, the existing trend's validity can be challenged.

As noted, there is plenty of important market moving data on tap for Thursday.

Let's see what happens.

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Disclosure: The author is long KBE, XLF, XLY, CVY. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.