Do We Need to Worry?

S&P500 daily at end of day

End of Day Update:

Stocks stumbled for a second day on intensifying rhetoric from Greece’s new leadership. That was enough to spook European markets and bring ours down in sympathy. But the low-volume, 0.4% loss was almost sleepy as compared to recent volatility.

While the S&P500 failed to hold 2,050 support, there was little urgency from participants to sell the violation. Owners seem fairly comfortable with these headlines and price-action. That confidence would crumble if losses accelerate, but as long as owners continue holding, we won’t have the supply necessary to pressure prices.

Last week’s rebound relieved bulls, but sentiment remains cautious. AAII and Stocktwits sentiment measures saw a big drop in bullishness last week, no surprise given recent headlines. But stable prices in the face of fear-mongering means most of it is already priced in. Those afraid of these headlines had plenty of time to sell, meaning anyone still holding stocks is demonstrating a willingness to own this risk.

While any number of geopolitical situations could flare-up, stability around 2,050 for a couple more days tells us the market is inclined to continue higher. When the market has every reason to sell off, but it insists on going higher, don’t fight it. On the other hand, if we cannot hold the 50dma Tuesday, we have a date with the 200dma.

Jani

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