Stocks End Week Lower As Greek Drama Continues
Stocks fell hard on Monday after it became clear that Greece would default on its debt and literally shut down their entire banking system for the week. Greece missed its latest payment to the IMF and became the first developed nation to default on their debt in modern history. In an effort to move forward, the tiny nation-state will hold a referendum on Sunday (07/05/15) to see if they will keep the euro currency or revert back to their old currency, the drachma. The “big” story here is not just Greece – it is the precedent that will be set and the broader ramifications for the entire Eurozone. If Greece is allowed to get away with defaulting and missing payments, then other troubled countries in the Eurozone (Spain, Italy, Portugal, etc) will quickly follow and that could threaten the continent and the global economy. U.S. stocks remain under pressure as all the major averages continue to fall. The bulls showed up and defended the 200 DMA line last week for the S&P 500 and the Dow Industrials, it is very important to see last week’s levels hold. Otherwise, we are in for a much deeper pullback. The “good” news is that even with all the selling, the benchmark S&P 500 is only down ~3% below its record high.
Monday-Wednesday’s Action: Stocks Plunge On Greek Woes
Thursday-Friday’s Action: Stocks Under Pressure As Greek Drama Continues
Market Outlook: The Central Bank Put Is Alive And Well
Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape. If you want exact entry and exit points in leading stocks, or access more of Adam’s commentary/thoughts on the market. Consider joining SarhanCapital.com.