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Although it would be nice to be able to move on to other important issues, the bottom line is that Greece clearly remains the focal point for traders from a short-term perspective.

Not surprisingly, Greek citizens voted "no" in resounding fashion on Sunday to the question of whether or not to accept the current deal on the table from the Eurozone and the country's creditors. Greece's PM Alexis Tsipras and his radical left-wing cohorts managed to convince the country that voting "no" would force creditors to re-evaluate their position. In short, Greek officials now expect to be able to renegotiate the terms of the country's debt.

In a televised address on Sunday night, Greek PM Tsipras basically took a victory lap and praised Greek voters. The PM said he was ready to return to negotiations with creditors and added that his government's immediate priority was to reopen the banks.

On the topic of the banks, the key thing to watch going forward is whether or not the ECB raises the ELA (emergency liquidity assistance). The bottom line is that banks have remained closed in Greece and will remain closed for the foreseeable future unless the ECB ups the level of capital it will commit for emergency funding.

Citing officials familiar with the matter, Reuters is reporting that the ECB is likely to maintain its ELA for Greek banks at its current restricted level. The article cited a source who said that the "no" vote is unlikely to prompt immediate action from the ECB. The article did note however that the ECB is due to meet today to discuss the Greek banks. The meeting is in response to Bank of Greece's formal request last night to the ECB to provide additional liquidity.

Whether or not the ECB ups the ELA levels remains one of the key areas to watch in terms of renewed negotiations and whether or not a "Grexit" will occur. According to Louka Katseli, who is the head of the Hellenic bank Association, ATM machines in Greece are likely to run out of cash within hours of the vote.

While Tsipras continues to talk tough with regard to renegotiating the country's debt, The Telegraph is reporting that the Greek government is taking steps in case ECB doesn't upgrade the ELA. The report indicates that top government officials are considering what can be considered "drastic steps" in order to boost liquidity and shore up the banking system. Apparently Athens is preparing to issue parallel liquidity and California-style IOU's in order to keep the country running in the near-term.

As for the prospects for a new deal with creditors, the ECB, and the Eurozone, Tsipras appeared confident on Sunday after the vote, saying that he expects a deal withing 24-48 hours. The PM continued to demand that any deal should include debt relief, invoking a report by the IMF released last week which said Greece's debt is unsustainable without a 30% haircut.

However, the Germans, Austrians, and Fins are less than impressed at this stage. While Chancellor Angela Merkel did say on Sunday that the wishes of the Greek citizens must be respected, Germany does not appear ready to bend to demands being made by Tsipras.

In an article, the FT cited Steffen Seibert, the head of staff for the German Chancellor, who said that Merkel sees no basis for negotiations over a new rescue package for Greece following the clear rejection of reform plans in the referendum. "With regard to yesterday's decision by Greek citizens the pre-conditions for entering into negotiations over a new aid programme do not currently exist," he said. Seibert added that while the door for talks was "always open," he insisted that Berlin was waiting to see "what proposals the Greek government places on the table."

In addition, German finance ministry spokesman Jaeger said today that the basis for any new negotiations was the ESM treaty. The spokesman added that there were no grounds for a debt restructuring given that Greece has yet to provide fresh proposals for financial aid.

Then there is the small matter of the legality of writing off debt owed to the ECB. In a report this morning, Dow Jones, cited the ECB's Noyer who said the central bank cannot restructure the Greek debt it holds, as it is banned from doing so. The article noted that Greece is due to pay €3.5B to the ECB on 20-Jul. And should Greece miss this payment, the ECB could cut off emergency funding to Greek banks altogether.

Separately, ECB's Nowotny said that a new aid program for Greece could take time and that it is an illusion it can be done within two days.

However, it appears that talks will continue this week between the EU and Greece. Reports indicate that German Chancellor Merkel will travel to Paris on Monday for talks with French President Hollande "to jointly assess the situation after the Greek referendum and to address the continuation of Franco-German close cooperation in this matter." At the same time, EU President Tusk has confirmed in a statement that a special Euro Summit will be held Tuesday to discuss the situation with Greek after its referendum.

And so it goes. While the vote is now over, it is safe to say that the drama is not. The good news is that so far at least, markets are not in panic mode. Yes, bourses in Europe are lower and stock futures are suggesting a weak open on Wall Street. However, stocks in Europe and the futures here in the U.S. are off their worst levels, providing hope that cooler heads may prevail.

S&P 500 Index - Daily

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From a chart perspective in the U.S., a meaningful decline could give the bears the edge from a short-term perspective. However, the 200-day and the 2040 level on the S&P 500 (which is about where futures project the venerable index will open) are likely to be key levels of support to watch today.

This Morning's Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell...

Major Foreign Markets:
    Japan: -2.08%
    Hong Kong: -3.18%
    Shanghai: +2.42%
    London: -0.50%
    Germany: -1.37%
    France: -1.67%
    Italy: -2.84%
    Spain: -2.01%

Crude Oil Futures: -$2.68 to $54.25

Gold: +$0.60 at $1164.50

Dollar: higher against the yen, euro and pound

10-Year Bond Yield: Currently trading at 2.308%

Stock Indices in U.S. (relative to fair value):
    S&P 500: -16.11
    Dow Jones Industrial Average: -142
    NASDAQ Composite: -34.60

Thought For The Day:

Be who you are and say what you feel, because those who mind don't matter and those who matter don't mind. - Dr. Seuss

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of the Greek Crisis
      2. The State of Fed/ECB/PBoC Policy
      3. The State of the U.S. Economy
      4. The State of Interest Rates

The State of the Trend

We believe it is important to analyze the market using multiple time-frames. We define short-term as 3 days to 3 weeks, intermediate-term as 3 weeks to 3 months, and long-term as 3 months or more. Below are our current ratings of the three primary trends:

Short-Term Trend: Negative
(Chart below is S&P 500 daily over past 1 month)

Intermediate-Term Trend: Moderately Positive
(Chart below is S&P 500 daily over past 6 months)

Long-Term Trend: Positive
(Chart below is S&P 500 daily over past 2 years)

Key Technical Areas:

Traders as well as computerized algorithms are generally keenly aware of the important technical levels on the charts from a short-term basis. Below are the levels we deem important to watch today:

  • Key Near-Term Support Zone(s) for S&P 500: 2040
  • Key Near-Term Resistance Zone(s): 2100

The State of the Tape

Momentum indicators are designed to tell us about the technical health of a trend - I.E. if there is any "oomph" behind the move. Below are a handful of our favorite indicators relating to the market's "mo"...

  • Trend and Breadth Confirmation Indicator (Short-Term): Negative
  • Price Thrust Indicator: Negative
  • Volume Thrust Indicator: Negative
  • Breadth Thrust Indicator: Neutral
  • Intermediate-Term Bull/Bear Volume Relationship: Moderately Negative
  • Technical Health of 100+ Industry Groups: Moderately Positive

The Early Warning Indicators

Markets travel in cycles. Thus we must constantly be on the lookout for changes in the direction of the trend. Looking at market sentiment and the overbought/sold conditions can provide "early warning signs" that a trend change may be near.

  • S&P 500 Overbought/Oversold Conditions:
          - Short-Term: Oversold
          - Intermediate-Term: Oversold
  • Market Sentiment: Our primary sentiment model is Positive .

The State of the Market Environment

One of the keys to long-term success in the stock market is stay in tune with the market's "big picture" environment in terms of risk versus reward.

  • Weekly Market Environment Model Reading: Neutral

Wishing you green screens and all the best for a great day,

David D. Moenning
Founder and Chief Investment Strategist
Heritage Capital Research

Indicator Explanations

Trend and Breadth Confirmation Indicator (Short-Term) Explained: History shows the most reliable market moves tend to occur when the breadth indices are in gear with the major market averages. When the breadth measures diverge, investors should take note that a trend reversal may be at hand. This indicator incorporates an All-Cap Dollar Weighted Equity Series and A/D Line. From 1998, when the A/D line is above its 5-day smoothing and the All-Cap Equal Weighted Equity Series is above its 25-day smoothing, the equity index has gained at a rate of +32.5% per year. When one of the indicators is above its smoothing, the equity index has gained at a rate of +13.3% per year. And when both are below, the equity index has lost +23.6% per year.

Price Thrust Indicator Explained: This indicator measures the 3-day rate of change of the Value Line Composite relative to the standard deviation of the 30-day average. When the Value Line's 3-day rate of change have moved above 0.5 standard deviation of the 30-day average ROC, a "thrust" occurs and since 2000, the Value Line Composite has gained ground at a rate of +20.6% per year. When the indicator is below 0.5 standard deviation of the 30-day, the Value Line has lost ground at a rate of -10.0% per year. And when neutral, the Value Line has gained at a rate of +5.9% per year.

Volume Thrust Indicator Explained: This indicator uses NASDAQ volume data to indicate bullish and bearish conditions for the NASDAQ Composite Index. The indicator plots the ratio of the 10-day total of NASDAQ daily advancing volume (i.e., the total volume traded in stocks which rose in price each day) to the 10-day total of daily declining volume (volume traded in stocks which fell each day). This ratio indicates when advancing stocks are attracting the majority of the volume (readings above 1.0) and when declining stocks are seeing the heaviest trading (readings below 1.0). This indicator thus supports the case that a rising market supported by heavier volume in the advancing issues tends to be the most bullish condition, while a declining market with downside volume dominating confirms bearish conditions. When in a positive mode, the NASDAQ Composite has gained at a rate of +38.3% per year, When neutral, the NASDAQ has gained at a rate of +13.3% per year. And when negative, the NASDAQ has lost at a rate of -8.5% per year.

Breadth Thrust Indicator Explained: This indicator uses the number of NASDAQ-listed stocks advancing and declining to indicate bullish or bearish breadth conditions for the NASDAQ Composite. The indicator plots the ratio of the 10-day total of the number of stocks rising on the NASDAQ each day to the 10-day total of the number of stocks declining each day. Using 10-day totals smooths the random daily fluctuations and gives indications on an intermediate-term basis. As expected, the NASDAQ Composite performs much better when the 10-day A/D ratio is high (strong breadth) and worse when the indicator is in its lower mode (weak breadth). The most bullish conditions for the NASDAQ when the 10-day A/D indicator is not only high, but has recently posted an extreme high reading and thus indicated a thrust of upside momentum. Bearish conditions are confirmed when the indicator is low and has recently signaled a downside breadth thrust. In positive mode, the NASDAQ has gained at a rate of +22.1% per year since 1981. In a neutral mode, the NASDAQ has gained at a rate of +14.5% per year. And when in a negative mode, the NASDAQ has lost at a rate of -6.4% per year.

Bull/Bear Volume Relationship Explained: This indicator plots both "supply" and "demand" volume lines. When the Demand Volume line is above the Supply Volume line, the indicator is bullish. From 1981, the stock market has gained at an average annual rate of +11.7% per year when in a bullish mode. When the Demand Volume line is below the Supply Volume line, the indicator is bearish. When the indicator has been bearish, the market has lost ground at a rate of -6.1% per year.

Technical Health of 100 Industry Groups Explained: Designed to provide a reading on the technical health of the overall market, this indicator takes the technical temperature of more than 100 industry sectors each week. Looking back to early 1980, when the model is rated as "positive," the S&P has averaged returns in excess of 23% per year. When the model carries a "neutral" reading, the S&P has returned over 11% per year. But when the model is rated "negative," stocks fall by more than -13% a year on average.

Weekly State of the Market Model Reading Explained:Different market environments require different investing strategies. To help us identify the current environment, we look to our longer-term State of the Market Model. This model is designed to tell us when risk factors are high, low, or uncertain. In short, this longer-term oriented, weekly model tells us whether the odds favor the bulls, bears, or neither team.


The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning, an advisor representative of CONCERT Wealth Management Inc. (CONCERT), is founder of Heritage Capital Advisors LLC, a legal business entity doing business as Heritage Capital Research (Heritage). Advisory services are offered through CONCERT Wealth Management, Inc., a registered investment advisor. For a complete description of investment risks, fees and services review the CONCERT firm brochure (ADV Part 2) which is available from your Investment Representative or by contacting Heritage or CONCERT.

Mr. Moenning is also the owner of Heritage Capital Management (HCM) a state-registered investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Neither HCM, Heritage, or CONCERT is registered as a broker-dealer.

Employees and affiliates of Heritage and HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or Heritage/HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.