The Greek Drama Continues On With Earnings On Deck

All of last week the focus was on Greece and China.

For now, it appears the nosedive in Chinese markets is over. However, I would expect a lot of volatility in that market over the next three months. Going forward, hopefully the Chinese market will begin to trade on fundamentals. Everyone keeps commenting on the slowing growth in China. Let's face it, 7% growth doesn't last forever. Going from 7% to 6% really isn't the end of the world.

The Chinese economy is complex and government policy will continue to dictate its future.

I personally don't invest in the Chinese market so my only concern is a crash in their markets affecting the U.S. markets.

Greece

If you have been watching the news this weekend the Eurozone and Greece are still in talks and negotiations on a deal. The current U.S. futures are down about 0.5%.

A complete Greek exit seems to be off the table. This event would have had the most negative effect on U.S. markets.

There is talk of a temporary Greek exit. I don't understand exactly how that would work as talks have not yet ended.

Volatility

As this all plays out, I still expect a peaceful resolution to the European situation.

Once this event has been concluded, barring any new events, I would expect volatility to trend back down for the near-term future.

There is still the possibility of deadlock and increased volatility in the short-term.

Bottom line is this week will be very interesting.

Focus

Your focus should continue to remain on U.S. economics and earnings. After the European drama subsides all attention will turn to the Federal Reserve once again. I personally focus on employment and consumer spending. Both have been weak lately but the longer-term trend remains positive.

Jeff Miller has a great weekly piece which you can view here. I try to read a lot each week and I tend to enjoy his writing the most.

Positions

I currently have some short positions in volatility left over from last week. I will not be initiating any new short positions as the risk/reward has now evaporated with the drop in volatility from Friday. Contango has returned to VIX futures and I would expect that to remain for the short-term.



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