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Street in Wait-and-See Mood as Greece Puts Up a Fight, Job Data on Tap

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June 4, 2015

We’re seeing tepid volumes and a few more folks holding their nose at risk as we inch closer to Friday’s payrolls report and a number of potential market-moving drivers.  In addition to the May jobs report, including some uncertainty that hiring will have perked up from April’s reading, the stock market is also prepping for an OPEC meeting and the ongoing push-and-pull in Greece debt repayment talks.

Data this morning showed that U.S. jobless claims benefits continue to hover near a 15-year low. It’s  fair to say that the stock market has retained its upside bias in part because some investors are betting that Friday’s jobs report could be positive enough to paint a positive growth picture but not so hot to push the Federal Reserve into more-aggressive interest-rate action than is expected. The dollar stabilized as well, cooling what had been mounting fears that a brawny buck would impede multinational firms’ ability to meet their earnings targets. 

Volatility-Lags-Stocks

FIGURE 1: VIX MOVE LAGS BROAD MARKET.

The CBOE Volatility Index (VIX), known as the market’s “fear gauge,” nosed back above 15 intraday this week but has remained well off that mark even as investors lightened “riskier” broad-market stock positions this week. Data source: CBOE. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Talks Continue. Greek Prime Minister Alexis Tsipras and his country’s international creditors were able to agree on some aspects of a financing deal at a meeting Wednesday night, but differences remain on some key issues, European officials said Thursday, according to the Wall Street Journal. For retail stock investors, it’s a gentle reminder that this issue remains a potential broad-market driver.

Financial Sector Validation? One of Wednesday’s leading sectors—and I believe a very positive sign if we are going to continue to go higher going forward—emerged in the financial sector. There’s a silver lining to the bond-market selloff. The bond market's higher rates are positive for financial stocks as it means that these companies now have a true spread and chance to make money.

Key Levels. As we watch the broad S&P 500, keep the 2100 level in mind as support and 2130 targeted as resistance. We’ve largely been knocking around in the same range since May 7, covering 2080 to 2130. Antsy traders are hoping that these late-week numbers are the catalyst to drive us out of this range. Once they do pass, traders may be motivated anew as many have trimmed positions due to the added risk this week. Perhaps the most interesting thing to me is that the CBOE Volatility Index (VIX) has not correlated to the defensive stock positioning, hovering near a relatively low 13.66.

Good trading,
JJ
@TDAJJKinahan

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