At 2 a.m. Monday morning, European time, Finance Ministers from the Eurozone — Greece’s creditors — were busy trying to hammer out a deal that would prevent a formal default on Greek debt.
The proposals being leaked early Monday were much worse than the deal the Greeks voted against so decisively just a week ago. The Greek governing party has fractured over the proposals, and the Greek prime minister has expelled from the party his most vocal critics. But Prime Minister Tsipras himself can hardly expect to survive if he accepts a deal that is worse than the one the voters rejected.
Almost none of the billions Greece would be borrowing would benefit anybody in Greece; the proceeds would be used to pay the creditors. And a faction of the European creditors, led by Germany, seem to be pushing Greece out of the Eurozone entirely, while another faction wants to keep them in and loan them more money, just so long as nobody actually has to acknowledge the default that has occurred. It is a terminal ruin.
There is no way out of this mess, even if some kind of deal is cobbled together. The most likely beneficiary of the trauma will probably be the US dollar, which is looking like a good place to park your money for a while. The losers will be the people of Greece.
But US equity markets came through a tumultuous week unscathed. The S&P500 large cap index ($SPX) closed at 2076.72 last Friday, down a few decimal points but essentially unchanged in a week of entirely bad news: the Greece drama, the thunderous crash of the Chinese stock markets, and even an alleged “computer glitch” that shut down the NYSE for three-and-a-half hours. Presumably it was the same glitch that shut down United Airlines and took the Wall Street Journal offline. Sure.
Today
Expect more of the volatility that bounced the markets around last week. We have a heavy schedule of important economic reports and the beginning of earning reports for Q2; the Fed chair is talking in public again – always good for a dozen points up and down, or down and up, regardless of the topic; and we have some heavily-traded index options expiring this week. It will be bumpy.
The SP500 mini-futures (ESU5) had a big bounce on Friday, and may retrace a little today (Monday). The short-term trend is still down, despite the bounce.
The 2050-55 area – the yearly pivot and the 200-day moving average line – constitutes a support zone today. If it is broken, the range pattern buyers will likely show up at the bottom of the rectangle pattern. At the top of the range, 2085-88 will be the first resistance zone for today. A move above it will be bullish, and will give the buyers a shot at the unfilled gap at 2095.50.
Major support levels for Monday: 2043.50-45.50, 2019.50-18.50, 2010-08;
major resistance levels: 2095.50-96.50, 2107-08.50, 2122-25, 2134-36.50
For more detailed market analysis from Naturus.com, free of charge, follow this link
Chart: S&P500 cash index (SPX), July 10, 2015
