Last week's volatility ended with another bang with Quad Witching on Friday, making Friday the 8th consecutive day in which the SPX/market traded between gains one day and losses the next, each day fairly volatile, despite a trend/bounce.
In the Week Ahead post from Friday I said,
"On an intraday basis, the knee jerk reaction looks to be exactly that as there was clear distribution in to it and today. I suspect with the way we'll probably close, we should see weakness early in the week, possibly Monday morning, but I wouldn't be surprised if we had a little more of this process leading negative before an actual downside reversal so unless I see something in to the close, I'll wait until Monday to add any additional positions like UVXY long."
As well as expecting the market to return to the stage 4 decline it had already entered from the February cycle.
Today is going to revolve around the Merkel/Tsipras talks as the final ultimatum day as reports indicate that the EU is not only unwilling to give Greece any more money until reforms are made, but Tsipras sent Merkel a letter last week saying Greece wouldn't be able to meet short term debt obligations without help, which is no surprise as they had to scratch under the sofa and raid their pension fund to make the last IMF payment of which several more of equal size are due in the next few weeks.
The Spanish Finance Minister said to FT over the weekend that Greece will receive no more funding until some solid reforms are in place and ever since the "Greek Deal", those reforms have obviously been hard to come by. Today's meeting between Merkel and Tsipras, the 2nd in 5 days is seen to be the ultimatum and perhaps deciding factor as to whether Greece remains in the Euro and even if they do come to an agreement, implementing it in Greece has proven challenging, they'd still have to pass any agreement through parliament with key Tsipras party members breaking with the young PM.
As to the market, it has lost ground as we expected for this morning thus far as has Europe/DAX at last look.
Speaking of the $USD, as should have been expected, the F_E_D is making a lot more noise lately about the strong USD. Both Lockhardt and the F_E_D's Evans both mentioned it had gained their interest Friday (strong USD) with Mester , Williams and Fisher all due to speak today, don't be surprised to hear even more.
In fact I wouldn't be surprised if a non-voting F_E_D member floated a QE4 rumor to kill the dollar, despite recent weakness.
What should this really mean to you? The F_E_D is very uncomfortable with a strong dollar especially if they'll be hiking rates any time soon so they'll do what all Central banks do first and try to talk t down. Don't get carried away with what they say, but watch the carry trades, they are key to equity prices (leverage), I suspect they are being unwound at a faster pace and will continue to be.
I'll be back shortly with a morning update.
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