US Style 'Greek Tragedy' - NOT

Here we go again – Headlines paint a picture of doom and gloom –

“Stocks close 1% lower as Dow Plunges Triple Digits”

“US Stocks Open Sharply Lower”

“Europe Woes and US Rate Outlook Weigh on Stocks”

Is this the beginning of the end that so many have been forecasting? Doubtful – but look - we did get hit with a boatload of macro data yesterday – some of it stronger than expected while some of it was a bit weaker then expected. Spending on 'big ticket' items was disappointing at negative 0.5% but that WAS the expectation, so why the surprise? Capital Goods orders and shipments both surprised to the upside, housing prices continued to march higher while Markit US Services PMI did register 56.4 - slightly below last month but still in expansionary territory.

We had Janet telling us on Friday that rates will begin to rise this year or maybe they won't, Fed President Loretta Mester warning of risks to the financial mkts and yesterday – Vice Chair Stanley Fischer – told a group in Israel at Tel Aviv University – that “the mkts should not be surprised by the timing or pace of rate hikes” - suggesting that a hike may be around the corner. Not so fast, cowboy……Fischer is more of a hawk – we get that – so it is easy to interpret his words as supporting a rate rise sooner rather than later. But is that the message that he really meant to send or was it just another way for the Fed to 'float the balloon and test the temperature'?

Either way - yesterday’s stronger macro data only lends further support to an improving economy –and a stronger economy would support higher interest rates – and higher interest rates suggest strength and strength is exactly what we are looking for.....so why the sad face?

You see – the triple digit moves (in either direction) in the Dow – reflect the lack of clarity and the mixed messages presented by members of the Fed and by the varied analyst interpretations of the data. It reflects investor unease between what they hear and what they feel. We have been conditioned to think that any rate rise will negatively impact stock prices - and so we get that 'Pavlov's Dogs' reaction......and that is a bit ridiculous - no? With rates so artificially low - is a 25 bp increase in Fed Funds going to derail the recovery? Not so much - but if it does then we have our own 'Greek Tragedy' on our doorstep.....

Now yesterday's action took the S&P right down to support at 2100....we tested it a couple of times and found that the long term asset manager is alive and well.....and is quite willing to put money to work at levels that make sense. The funny thing about all of this noise is that - Where have we really gone over the past two months? Nowhere! The Dow and S&P remain entrenched in a tight range – bouncing around between near term support (50 DMA) and current resistance defined by the recent highs. Long term investors have not changed their outlook, they remain buyers on balance and draw a line in the sand at the clear support levels. Days like yesterday act as a catalyst to 'shake the trees' and loosen the weaker branches.

Now there has been a lot of talk about the divergence between the Dow transports, Dow Utilities and the Dow Industrials - otherwise known as Dow Theory. As long as these indexes move in opposite directions - it will be hard for the broader mkt to make any significant new highs - thus the churn. Both the Transports and the Utilities are trading below significant support defined by the longer term 200 DMA and some are even suggesting that we have now seen the 'death cross' in both of those indexes......

But as my friend - Helene Meisner (Twitter handle @hmeisner) - points out - Be careful! The 'death cross' is only a true death cross when the 50 dma crosses the 200 dma when BOTH are in a downtrend.....in this case - that is not true of either.....the 50 dma is in a downtrend - but the 200 dma is still in an uptrend - so do not use the 'Death Cross' to support your argument..... You can though use the weakness to argue the fact that the mkt remains confused and thus any further upside will be a bit of a challenge.

This morning - US futures are up 2 pts in early trading. Today's eco data is light - Mortgage Apps is the only event...and they came in slightly weaker than expected at -1.6%,,,,,No worries - the mkt will re-test support right here at 2100 ish....if it holds then look for a move slightly higher...if it fails then a test of 2075 is in order. Chatter about the dollar and where bond yields are going will dominate the discussions.....

The G7 meeting kicks off in Dresden Germany today...(the G7 is the group of 7 of the major advanced economies around the world defined by the IMF and it includes: US, UK, France, Germany, Italy, Japan and Canada). The agenda includes trying to fix the faltering global economy in light of a threat of a Greek default, a stronger dollar, rising oil prices and global turmoil in the bond mkts....Interesting is the fact that China will be a hotly debated topic and China is not even there to participate - They are still considered an 'emerging economy'.....Wake UP! This emerging economy has been changing the world order and the possible inclusion of the Chinese Yuan in the IMF currency basket suggests an ever increasing role in Chinese economic power.

Overnight in Asia - China was up 0.63% flirting with Shanghei 5K....a level not seen in 7 yrs.....and Japan was up +0.17%....Hong Kong and ASX both moved lower in sympathy with the US.

In Europe this morning we are seeing strength - all mkts higher.....as investors ignore the building Greek disaster.......News reports are telling us that Greece is likely to miss the deadline for a deal by week's end - as neither side is moving and while this crisis deepens - the Europeans are playing down the fears of an outright default on June 5th (next Friday)....Greece has said - 'that' it - game over - we are out of money'....but the sense is that the G7 will try to negotiate a deal to prevent a nuclear meltdown......Stay tuned....FTSE +0.65%, CAC 40 +0.54%, DAX +0.19%, EUROSTOXX +0.41%, SPAIN +0.53% and ITALY +0.93%.....

Simple Baby Back Ribs

These are simple to make and so good. For this you need: the Baby Back Ribs, and some Sweet Baby Rae's BBQ sauce.

Bring a pot of slightly salted water to a boil - add the ribs and return to a boil. Remove the ribs and place in a baking dish. Now add the BBQ sauce and massage the ribs well. Cover tightly with foil and place in a 325 degree oven and let cook for min of 2 hrs......

Now - remove the foil and broil until nice and crispy.....Serve immediately with cole slaw and fresh corn on the cob. Prepare to get your hands sticky... - the only way to eat these ribs is outside on the deck under the evening sky.....


Buon Appetito.