Greek Vote To Test Eurozone

January 25, 2015

Eurozone Exit Talk Will Increase

Just when you may have thought it was safe to jump back into the European waters following the ECB’s stimulative party, elections in Greece may rock the boat. From The Wall Street Journal:

Greek voters have thrown down a gauntlet by handing an impressive victory in Sunday’s elections to Syriza, a radical left-wing party that had campaigned on a promise to secure debt relief. Greece and the eurozone now need to swiftly convince the markets and ordinary Greeks that they can reach a deal. Prolonged uncertainty would lead to capital flight and even bank runs that would inflict serious damage on the Greek economy, potentially leading to Greece’s exit from the eurozone. Much hinges on how all sides conduct themselves in the hours ahead. The markets assume that the risk of Greece exiting the euro is small, but officials close to the situation are not complacent. Some fear that the compromises required on both sides may prove too difficult.

Markets Remain On Edge

The news from Greece is not surprising nor particularly unexpected, which aligns with the still tentative nature of the risk-on vs. risk-off ratios covered in this week’s stock market video.

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Investment Implications - The Weight Of The Evidence

While the broad market continues to move sideways (see chart below), the bigger picture may call for a reduction in growth exposure this week. In addition to the news from Greece, a Fed announcement is coming Wednesday and GDP figures Friday.

The Most Important Thing For 2015

January 23, 2015

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Most Recent Comments Via Twitter

January 23, 2015

You can access them here (@CiovaccoCapital). You do not need to know anything about Twitter to view our comments or use the links to view charts.

Are The Stock Bulls In Trouble?

January 16, 2015

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Fine Line Between Patience & Risk Management

January 15, 2015

In last weekend’s video we noted the S&P 500’s trend still looked good, but that there was little margin for error. As we prepare for the most important day of the week (Friday), there are six areas that may attract buyers between 1992 and 1957:

  1. Price is at the bottom of the blue trend channel (see 1 in chart below).
  2. The 38.2% Fibonacci retracement from the October low to the December high sits at 1989. The S&P 500 closed at 1992 Thursday.
  3. The early January low was 1992.
  4. The mid December low was 1972.
  5. Price was rejected at 1970 in October (what once was resistance may now act as support).
  6. The 50% retracement comes in at 1957.
    1. Our last two moves have been defensive in nature (sold tech stocks and bought bonds). If stocks cannot firm up before Friday’s close, the rules will most likely call for additional risk reduction. The levels in the chart above allowed for some patience this week, but the stock market’s margin for error is thin. Is it possible stocks break all six levels in the coming days? Yes, it is possible.

      Other things to consider: (a) the market is closed on Monday, January 19, and (b) the ECB has an important announcement coming next Thursday. We will keep an open mind as things unfold Friday and next week.

Flexible Migration Strategy

January 14, 2015

Today’s chess move in our accounts aligns with both the “incremental” and “hybrid” strategies. Under the incremental approach, we added to the conservative side today. If a bear market or multiple-month correction evolves from here (not a prediction), we have taken another step toward building a portfolio with a conservative bias. If stocks find their footing soon, we still own equities. The market and the hard data will guide us in terms of the next steps (if any). The hybrid strategy was outlined in a recent video. We will continue to monitor the markets and our accounts closely until things settle down.

Most Recent Comments Via Twitter

January 13, 2015

You can access them here (@CiovaccoCapital). You do not need to know anything about Twitter to view our comments or use the links to view charts.

The Market’s Next Obsession

January 12, 2015

Mark Your Calendar

Over the past several months, Europe has been dealing with low inflation and the possible threat of deflation. The market will be paying close attention between now and the next European Central Bank (ECB) statement. From Bloomberg:

The European Central Bank’s public debate over buying government bonds is reaching a climax. After weeks of argument about quantitative easing in speeches and interviews, officials have just a few days left before a conventional quiet period starts ahead of their Jan. 22 policy meeting. Adding to the intensity, a European court opinion is due that could color any program.

Big Moves Often Follow

While the interest rate vs. U.S. growth debate has weighed on stocks in recent months, the sideways action in U.S. stocks (see chart below) has been caused, in part, by ongoing concerns about the European economy.

Given the sideways nature of the typical U.S. stock in recent months, this week’s video takes a historical look (1981-2014) at indecisive markets and answers the question:

What typically happens next?

The first part of the video looks at the present day market (retracements, patterns, trends). The historical review of indecisive markets begins at the 7:00 mark.

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Investment Implications – The Weight Of The Evidence

The big picture for equities still looks favorable, but stocks have little margin for error in the next few weeks. If the S&P 500 breaks its recent lows (1992 & 1972), the risk-off case will gain some additional traction. Just as the reaction to the Fed is often binary, the ECB’s January 22 announcement could send equities flying higher or into a tailspin.

Stocks: Catching The Next Big Move

January 9, 2015

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Video Coming Soon

January 9, 2015

It should be posted sometime after 9:00 pm ET Friday.