US stock futures are slightly lower this morning with all eyes firmly trained on Greece. European finance ministers are pushing for another round of deep austerity cuts in return for the newest round of bailout money, and the Greeks are none too pleased about it. As we have seen several times over the last year, they will take to the Streets in a 24-hour strike to protest the new cuts. However, Greek politicians will continue to meet to try to hash out terms of a second bailout package that will maintain their position in the Euro zone.
The ultimate deadline for Greece to come to an agreement with creditors and Euro finance ministers is March 20. The country has a gargantuan amount of debt coming due on that date that it will need to refinance, and the lack of a bailout package would ensure a messy default. While the market remains quietly resilient in 2012, investors are not keen to add risk exposure with such a high stakes event still in the balance. The longer the saga drags on the more anxiety is likely to build in the market, but resolution would likely send stocks to new highs for the year.
Also on the docket today is congressional testimony from Fed Chairman Ben Bernanke. Bernanke has his share of critics who believe his inflationary monetary policy will eventually have a devastating impact on the US and world economies. Sen. Paul Ryan provided some of the most stern and critical Q & A debate at the post-rate decision press conference last week, and it is likely we will see some more of that today. The Fed now believes it will keep rates near 0% until at least 2014, and often hints at its readiness to enter into QE3 if the economy need a shot of liquidity. However, a recent uptick in employment data may prevent the Fed from ever needing to do QE3, but that remains to be seen.
Gold (GLD) and commodities in general often react to the Fed chairman’s testimony. When he announced the 2014 forecast for keeping rates exceptionally low, GLD skyrocketed. However, last Friday when the strong employment report dramatically decreased the probability of QE3 any time soon, GLD plummeted.
Corporate earnings season rumbles on and we had a few high profile reports in the last 24 hours. Coca-Cola (K) is about 1% higher this morning after the company’s EPS and revenues beat consensus estimates. The big winner overnight is Coinstar (CSTR), which is up almost 20% after seeing a dramatic rise in revenues and EPS that handily surpassed analyst expectations.
NCR Corp (NCR) is 5% higher this morning after also exceeding EPS and revenue estimates. Rounding out a strong group of earnings results, Yum! Brands (YUM) is 2.5% higher after a strong report.
It is healthy for the market to get some digestion after a rally, and for now that is what we are getting. The market has rallied into new areas and then built a new floor to trade against.
We now have a two day pivot on the SPY around $133.77-$133.83. If this level holds, that will keep the market at same speed and composure. Under that level and we can see $133.40 (1/26/12 high). Friday’s gap gets filled down to $133.02. Lately we’ve touched/tested this type of pull-in area, but closed way off it.
The 10-day moving average stands at $132.45. Strong markets ride this line, and we are extended from it. Strong markets also ride the 20-day MA, which is a lot lower at $131.03. So don’t fall asleep behind the wheel. Stay hedged and be prepared if we have to switch gears.
Resistance on the SPY sits at the Two day high of $133.50-$133.65. Above this pivot level and the next zone is $134.82-$135.70.
Disclosures: Scott Redler is long SPY, OIH, WMT, LULU, SLB, AIG, JPM, FIO, QCOM, FCX, DRYS, LNKD, P, AAPL, VMW, DNDN, DNDN calls, VXX. Short DIA.