Greece Election Bounce | FOMC Meeting
The election vote in Greece should go to the pro-bailout parties and it will likely cause a brief market bounce on Monday. However, just like the overnight bounce after the Spanish bank bailout, it probably won’t last long and the bounce will hit strong resistance up near 1,348 (50 SMA) to 1,358 (100 SMA). Investors seem to be focused more on the lack of longer lasting solutions now instead of these very temporary news bites.
The early week strength should take a pause after the very sharp rebound from early June. The bull flag that we highlighted in the technical analysis chart from Wednesday night did play out as expected to the upside. Also, the 50 SMA target move to 1,350 that we forecasted from last Sunday’s newsletter should be hit early this week. After that, it could be another choppy ride this week depending on the G20 meeting and the FOMC meeting news.
1) The “Group of 20″ leaders meet in Mexico, June 18 and 19. Depending on the election results in Greece and the market’s reaction, this could be a big market mover.
2) The next day, June 20, the FOMC will release their latest monetary policy statement with Chairman Bernanke’s quarterly press conference to follow. Depending on the developments in Europe this may be the time the Fed signals or hints of another round of monetary stimulus.
The markets will remain choppy in the short term because of all of the traders pushing markets up and down based on daily momentum computer trading. And, unfortunately, the choppiness may be the norm for most of the summer and into the Fall Presidential election the way things are looking now.
MR recommends investors continue to remain cautious and lighter on riskier equities until early July or only after the longer term financial situation in Europe has more clarity. Until some of the longer term structural debt issues have been addressed with a detailed plan, the market still has a much bigger downside risk.
Traders should remain nimble and can play select stocks on both sides of the market.
Power Stock Picks:
As promised, tonight’s power picks are going to be relative strength speculative stocks in the drug and biotech industry. These stocks don’t seem to care what is going on in Europe and they continue to make big gains. Only take small positions and make sure to put in stops but the rewards could be well worth the risks for traders.
Gold and silver are still working higher in the short term. Oil is still trying to bottom and investors can scale in on any more weakness a little at a time.
The caution alert for retirement accounts and investors is still present and will remain for the foreseeable future.
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