Greek Debt Drama May Be Over but We Can Count on Sustained Volatility

With the situation in Greece reaching a finality, markets are now looking for the next source of sustained volatility.

As of early Monday morning we all woke up to a ‘world-wide’ rally following news that Greece and euro creditors had reached a bailout agreement. Bravo and good for them and a few traders I know are relieved to know that Greece will continue to be in the euro zone.

However, outside of providing volatility we haven’t seen in years and even fewer who have lost any sleep worrying about the fate of Greece (no offense and say for affect), but traders HAVE lost sleep while following the movements in the EU/China (Shanghai/S&P minis), which are often more volatile than the moves in the US markets during actual trading hours.

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NOTE: I don’t mean to minimize the humanitarian and/or ripple effects of any event(s) that would cause harm in any way, but this Greek situation seems have to come to fruition and “the news is out.” So just like a stock or sector that has been hot for a couple of days the proverbial position has unfolded, so as we say on the trading desk…. NEXT.

Personally, and I am not alone in this, I believe the moves and ‘news’ coming out of the Asian markets provide just as much uncertainty as to what Greece has provided. However, the difference is that Greece has provided more intra-day moves (which is why we play TVIX UVXY), but the closes in the Shanghai Comp have left a bigger impact on the US markets.

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Moreover, we have been setting the tone, but things will change in the following weeks as the effect on the strong USD (to put it lightly) will be in the spotlight, as HUGE multi-nationals start reporting earnings this week (GE/HON/JPM/INTC). Apart from the occurrence of another major geo-political event (actually more than likely), the US will take the lead again as earnings come in as the strong USD continues. It’s almost time that we start hearing about the interest rate debate again, that few would argue is not a matter of IF but WHEN Yellen raises the rates.

Now, besides the obvious volatility and trading range that the Greece uncertainty has given us, I wish we had one more week of this, the main reason being…. the moves in the VXX and range in the US markets and S&P minis have been the best in some time. Last Tuesday we had our biggest move from an intra-day low to high since October 2011.

So, let’s keep in mind the company’s report this week: WFC JPM JNJ CSX DAL INTC NFLX GE HON SLB… name but a few, which are among the “best of breed” of the respective sectors. I wanted to see how the #’s and reaction to the above mentioned acted not only that day, but in the the subsequent days after these wild futures moves.

Let’s take NFLX for example – NFLX reports numbers and opens up $30 ….it is way better to gauge and absorb how the street reacts to the numbers in a greater trading range than a narrower range. Last quarter when we were in a consolidating uptrend, it was harder, for lack of a better term, to see if the reaction to earnings was a product of the company’s’ #’s or held up because of the uptrending market. So my point is, I wanted this Greece situation to continue for a greater trading range in order to get a better picture of relative strength and relative weakness.

As of now, we are taking a ‘wait and see’ approach and as mentioned we are focusing on the USD and earnings plays while obviously continuing to put more credence than usual on how the European markets close, but until then, the stocks we have been playing at TVMarkets:

  • Casinos – WYNN MGM MPEL LVS
  • Airlines – DAL AAL LUV
  • Semi-conductors- QLGC MU TXN SNDK SWKS STX WDC ADI
  • Cyber-security- CUDA FEYE CYBR
  • Crude- USO TSO VLO MPC
  • Individual names: LL Z FB FIT CHK WTW TSLA
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