In the news today there were reports that a Greek debt settlement deal may be close at hand as two "insiders" familiar with Germany's position in the negotiations reported that Germany may be satisfied with Greece committing to just one economic reform sought by creditors to open the doors to bailout funds. Although not directly confirmed by German government officials, this information was supported by a statement today from German Chancellor Angela Merkel who said to reporters: "Where there's a will, there's a way....The goal is to keep Greece in the euro area."
This news caused equity markets to surge, and the DOW gained 236 points by the end of the day. This triggered a short-term buy signal in the broad stock market. Normally I would be cautious about trading such a sudden and volatile move triggered by a news event, but in this case the timing was ideal for a reversal, the DOW was in the ideal target range, and several technical and cycle patterns suggest a significant bottom now. I went long in the broad stock market today with a stop loss in the DOW at 17,700 which seems to be the bottom to the correction. This stop loss is less than 1.5% from my entry point and would be a minimal loss should the market suddenly turn south again. Can that happen? Well, yes. We are trading in a very volatile market environment, and if the Greek debt negotiations start to break down again, another downturn is certainly a possibility. For now, though, timing factors, technical studies, and a seemingly positive mood among the players in this latest Greek tragedy are painting a bullish picture for equities, and this could drive a strong short-term rally. I want to emphasize short-term here because the medium-term picture for the broad stock market shows that a substantial correction (possibly 10% or more) is still due (overdue) and could happen anytime. If the markets do rise into the end of this month (another reversal zone), I will cover any long positions and will most likely be looking to sell short. Now holding a long position in the broad stock market.
Hope for resolution of Greece's debt problems was good news for equities but bad news for the U.S. Dollar Index which continued to fall today. There is now some support for the dollar at its recent lows in the 93-94 area, but if that breaks, the greenback could start a more serious correction.
A weaker dollar boosted gold and silver prices with gold exceeding the $1190 level intraday (it closed at $1186). The end of this week could be a significant turning point for the precious metals. If gold's rally continues into Friday, I will consider a short position. Directional momentum continues to be strongly bearish for gold, but it is still mixed bullish and bearish for silver. On the sidelines of gold and silver.
I bailed out of my short position in crude oil today slightly above my entry price with very little loss. It is looking like crude's correction to $56.51 on May 28 may have been it, and we may have missed the target range of $52 -$55.
The "deadline" for this correction is the end of this week (or possibly early next week) so there is still a chance of prices dipping below $55, but today a strong bullish momentum signal appeared in crude charts which suggests the correction is over. I felt it was better to get out with little or no loss than to risk a larger loss should this market start to rally now. Out of crude oil for now.