Courtesy of John Nyaradi
This will certainly be a wild week for ETF investors as the Greek drama continues to unfold and a series of economic reports come in during the week.
At Wall Street Sector Selector we continue to feel comfortable with our inverse ETF and put option positions.
Our portfolios generally were flat to slightly higher with the Option Master being the best performer (and the highest risk) with unrealized gains so far of +22.7%, +6.6% and +9.5% in our three positions that all were initiated on June 7, 2011.
On My Wall Street Radar
chart courtesy of www.stockcharts.com
In the chart above, we can see how the S&P 500 (SPY) managed to stay above the all important 200 Day Moving Average and remains relatively oversold with RSI in the mid 30s and still well below its 50 Day Moving Average, while MACD continues to indicate negative momentum.
A short term bounce here wouldn’t be a surprise, however, Friday’s action was relatively weak into the close and significant nervousness prevails as the Greek drama will continue to unfold on Monday and Tuesday of next week.
Market internals remain weak and multiple point and figure sell signals exist in major sectors and indexes.
The Economic View From 35,000 Feet
Major U.S. indexes managed to eek out a small gain for the week to break six consecutive weeks of losses. Highlights (or low lights) of the week were:
ü Major problems, widely reported, with Greece
ü Italy’s credit rating was put under review by Moody’s for a potential downgrade due to potential problems with its debt and growth outlook
ü May retail sales declined -0.2%
ü June Empire Index declined -7.8 compared to +11.9 previously
ü June Homebuilder’s Index declined
ü June Philadelphia Fed declined to -7.7 from +3.9
ü June Consumer Sentiment declined to 71.8 from 74.3
ü International Monetary Fund cuts U.S. growth rate projections for 2011 to 2.5% and warns of dangers in the Eurozone and that the U.S. needs to address its deficit situation.
What It Means for Stock Market and ETF Investors
What this all means for investors is an increasingly treacherous environment with big picture disputes at home and abroad coming to a head within the next few weeks. Interestingly, leading ETFs (featured below) continue to center around Treasury Bonds as the flight to safety trade continues.
The Business and Financial News Week Ahead
Next week the Greek drama will continue to unfold as their Prime Minister takes his new cabinet for a vote of confidence and they have to continue their work to meet the austerity demands to receive more bailout money as riots continue in the streets.
On a historical basis, my friend, Jeffrey Hirsch, offers some interesting historical data on market performance during the week after options expiration (this coming week) in his article, “June Option Expiration Week Soft and the Week After Terrible “
Furthermore, we’ll hear from Dr. Bernanke and the Fed regarding interest rates and on Friday get another revision to 1Quarter GDP which will be critical to future market direction.
Tuesday: May Existing Home Sales
Wednesday: FOMC interest rate announcement
Thursday: Initial Unemployment Claims, Continuing Claims
Friday: 1Q GDP Revision, May Durable Goods
ETF Spotlight
Leaders: (NYSE:TLH) iShares 10-20 Year Treasury (NYSE: IEF) iShares 7-10 Year Treasury
Laggards: (NYSE:EWD) Sweden (NYSE: EWI) Italy
Wishing you a great weekend and week ahead,
John
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