Watch Out For A July 4th Selloff
Saxo Bank | Jun 26, 2015 01:54PM ET
Background
The fourth of July is arguably the second biggest holiday in the US after Thanksgiving on the fourth Thursday in November. Therefore in the US, be advised that Friday is a market holiday, a day in lieu as July 4 falls on a Saturday.
There will of course be plenty of market reaction to the deal or no deal scenario that will follow from the weekend discussions over extending the bailout terms for Greece. If there is a last-minute patchwork deal put together, it will not be a good one. D-day for Greece falls on Tuesday and any decision when a loaded gun is aimed at one’s head is unlikely to be a good one.
If Greece gets new financing the markets will rally, just as they did on Monday June 22. If there is no deal, one can expect turbulence and a downshift in equities will follow.
That in itself would not be so bad as I am a long-term bull and would be happy to scoop up quality stocks at reduced prices…especially as the reason for the decline would not be on company fundamentals.
That said, I am just a little concerned about how the market may trade toward the end of the week…or should I say the short-week.
On Monday there is a historical although still significant data point in Pending Home Sales for May. The estimate is for 1.2% compared to 3.4% last time. Pending Home Sales is based on sales of existing homes where the contract has been signed but the transaction has not been closed, making it roughly equivalent to the new home sales definition.
As the week wears on the data becomes more significant and Tuesday, June 30 in addition to the Greek situation is marked by the releases of June Consumer Confidence from the Conference Board. Here there is reason for market optimism as the call is for 97.2 cf. 95.5 in May.
Of course, the crucial data will be on employment and the early forecast is for Non-Farm Payrolls to be booked at 232,000 from 280,000 although unemployment may well fall to 5.4%. There is another data point that I would be cautious about as the Average Hourly Earnings (AHE) figure is forecast to decline to +0.2% from +0.3%.
Source: Bureau of Labor Statistics
The chart above lists the month when the data was released, so it was for the previous calendar month. When AHE in February was reported in March the decline saw the S&P 500 fall by 1.42% on the day. That in itself is not any form of proof as when the April reading was announced in May the S&P gained ground.
Get The News You Want
I have to think ahead with some element of “gut instinct” and suggest that if we have had a positive week in the equity market I sense that any Thursday data point that is much less than expected would give reason for the markets to sell off into the long weekend.
I would be quick to make a day trade in such a case on Thursday and look to be out again with my buying boots on by Monday July 6 as I am bullish on America.
I am not giving parameters right now for this day as that will depend on how the market is looking at 13:29 BST on Thursday July 3.
Source: www.investing.com
Source: www.investing.com
- Time Horizon: Short-term
— Edited by Clemens Bomsdorf
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