The Algos Are In Control

When it comes to investing, Dave has got to learn to lighten up.

This is a very tough market to trade unless you are very very short term.  As a position trader or swing trader, the trend is my friend.  But the trends have been few and far between this year so far.  In fact the only trend of any note took place in February.

The market refuses to sell off, but also refuses to rally too hard either.  We are in a low volume trading pool where the algorithms are picking off the stops to the upside and the downside.  When there is lower volume it is easier for the machines to pick of the traders traditional stop placements at previous lows and highs.  Call me a conspiracist, but that is my theory.  Hence the reason for these wide ranges, multiple “v” bottoms and extreme volatility.

So what’s next?  I expect the market to have another go at climbing higher again this week, possibly testing or going through the previous all time high in the S&P, not just in the Nasdaq.  The market is still vulnerable to bad news, but it is my belief that it wants now to go higher again.   Although, I do not think we will see prices above 2150 on the ES E-Mini S&P 500 Futures before we see a multi-day sell-off, possibly taking us down into oversold territory.

I much prefer to trade bottoms after a sell-off, I do not like buying breakouts, and although my portfolio survived yesterdays dip, I do not think we are about to go screaming higher.  Therefore, my hope is that we do indeed print out a new all time high on the S&P by Friday and I get the chance to close out my modest profits before we see rather more selling than we have for a couple of months.  This slow grind higher followed by one day sell-offs is getting tired!

Market News:

U.S. stocks closed higher on Wednesday, recovering from Tuesday’s sell-off, as encouraging Greece headlines boosted investor sentiment amid a slight pause in the dollar and yield climb.

The Nasdaq jumped nearly 1.5 percent to end above its previous closing high of 5,092.09. The index lost 1.1 percent on Tuesday.

The Dow Jones industrial average closed up about 120 points. The blue chip index fell as much as 242 points on Tuesday before closing 190 points lower.

European stocks opened higher and rallied on initially encouraging reports out of Greece. The German DAX closed up more than 1 percent, while Greece’s ATHEX Composite ended 3.5 percent higher.

Greek Prime Minister Alexis Tsipras said on Wednesday the negotiations are on the “final stretch” towards a positive deal, Reuters reported. A European official said in a Bloomberg report that “we are still working toward an agreement” and that no accord was reached.

Separately, the European Central Bank left the ceiling on emergency funding for Greek banks unchanged for the first time since February, Reuters said.

Later in the day, German Finance Minister Wolfgang Schaeuble said there was not much progress in the Greek debt talks and he was surprised by the upbeat tone from some Greek government officials, according to an ARD television interview cited by Reuters.

Marc Chandler, foreign exchange strategist at Brown Brothers Harriman, said the dollar moved on Greek headlines but he is still suspicious that much progress was made.

Athens must make a 300 million euro payment to the International Monetary Fund on June 5, ahead of several other payments due to the IMF later in the month, for a total of 1.6 billion euros.

European stock markets traded higher Wednesday despite concerns over Greece’s deteriorating financial situation.

U.S. Federal Reserve Vice Chairman Stanley Fischer said Tuesday that markets should not be surprised by the timing or pace of rate hikes.

Thursday:

2:20 a.m.: San Francisco Fed President John Williams in Singapore

8:30 a.m.: Initial claims

10 a.m.: Pending home sales

1 p.m.: $29 billion 7-year note auction

2:45 p.m.: Minnesota Fed President Narayana Kocherlakota

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