The Euro started off the day down on Merkel comments about a strong Euro harming reform efforts. WTI down on stronger USD and oversupply concerns. Next week's big scheduled event is the FOMC meeting on Wednesday, June 17. It's a 2-day meeting, so the FOMC will update their growth, inflation and rate forecasts. PPI came out in-line at the core level but slightly above on the top line. Front eurodollars traded down to their LOD after the release, although today's low is a couple bps above yesterday's low following the strong retail sales report. Covered the 10-year note future short yesterday after the 30-year auction. Still short Mar 2016 eurodollars, added yesterday and may add again today if the front end stays weak. Yield curve bull flattened again today. Consumer spending may remain weak; a result of a higher savings rate. Consumer is under-saved for a longer retirement. The House is set to vote on the Trans-Pacific Partnership today which is the biggest trade pact since NAFTA.
Greece headlines hit just before the European close again. Greece is submitting a counter-proposal and meeting creditors Saturday. To think this tiny country moves the currency, bond and stock markets globally is a joke! Greece is better off out of the Euro in my opinion, and its just a matter of time before they get there. All the debt is owned by the IMF and ECB, so there will be no credit contagion problem... just a media circus! Plus this leak sounds like it came from the Greek side, which has no credibility in my mind.
Today is a good day to clean up and hedge some long positions after nice gains over past few days. The S&P remains in this tight trading range. I thought it was going to break to the down side before Wednesday's strong rally. Still like select tech and health care names, but prefer to hold them hedged until the S&P can muscle up some renewed strength. This might not occur until the next earnings season begins after the Independence Day Holiday. With a month-long gap before earnings news flow, covered calls might be an attractive way to hedge longs. Any pre-announcements are likely to occur in the next few weeks before the earnings quiet period, and this may give the shorts the upper-hand near-term.
REGISTER WITH HVST.COM AND JOIN MY PRIVATE NETWORK
Michael Grove, CFA