Market Will Focus On Background Noise This Week – Greece, China and Fed Will Spark Profit Taking

Posted 11:30 AM ET - Last week, the market rebounded off of the 100-day moving average and the S&P 500 was up almost 60 points. It was able to shrug off weak economic data and Greek credit concerns. At the highest level, we were only 30 S&P points from an all-time high. Friday's jobs report was strong and 257,000 new jobs were created in January. I don't trust the government's number since it is filled with seasonal adjustments. ADP showed that 218,000 new jobs were created. That was a little below estimates. They process payrolls for small and medium-size businesses and they have their finger on the pulse. Regardless, Friday's Unemployment Report will spark tightening fears. The next FOMC meeting will be interesting and I expect to see nervous trading ahead of the statement. Greece is in the headlines again. Leaders are not toning down the rhetoric and they are threatening to ignore fiscal spending agreements. They believe they hold all of the cards and that the entire EU will fail if Greece is kicked out. A part of me wants them to be kicked out and a part of me remembers what happened when we let Lehman fail. This dogfight will weigh on the market the next few weeks. This morning we learned that trade numbers in Germany were much better than expected. Quarter over quarter growth grew 4.7% and that comes after a 10.5% quarter over quarter number in Q3. Unfortunately, China's trade numbers were weak. Exports fell 3.3% when the street was looking for an increase of 5.9%. Imports fell 19.9%. You know from my comments that I believe China is the key to a market rally or decline this year. China's stock market held up fairly well because analysts are expecting another round of easing by the PBOC. Two decades of growth has resulted in massive excess capacity and any prolonged decline will reveal credit issues. QE has not been stimulating economic growth. Domestic economic releases were fairly weak. Durable goods orders, GDP, ISM manufacturing and ADP were light. We might be hitting a soft patch of our own (again, I don't trust the government's jobs report). Hourly wages did tick higher, but much of that was due to minimum wage increases in 21 states. Earnings season is winding down and the results were good. More than 70% of companies beat estimates. Unfortunately, the guidance was very cautious. A strong US dollar will impact earnings for international companies and it will impact exports. Earnings and economic releases are very light this week. That means the focus will shift to all of the background noise. Greece, the Ukraine, China's trade numbers and Fed tightening will weigh on the market. Last Friday I mentioned that we were likely to rally and reverse. That is exactly what happened and I made nice money day trading that move. I don't see the advantage of taking overnight positions when the market is range bound. We lack momentum and until we breakout/breakdown, I don't plan on holding overnight. If the market can close below SPY $198, I will buy puts and hold overnight. The SPY is trapped between $199 - $205. The bid is fairly strong and the market has been able to shoulder negative news. Five-year bull markets die hard. Watch the last hour of trading. That will be the key. I believe that Greece will weigh on the market. Overhead resistance is strong as we approach the all-time high. I am trading the one hour range. If we are above it, I am going long. If we are below it, I'm going short. . .

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