After heavy overhead resistance, fears of rate hikes and Greece sent the S&P 500 screaming lower, the index caught triple bottom support at 2075. While immediate-term fears of Greek default have subsided, we’re not out of the woods just yet.
We must still contend with rate hike fears and economic weakness as the S&P 500 challenges an historic top around 2128. Failure here, as we’ve noted in the past, could send the market back below its 50-day moving average.
As usual, though, it’s a wait-and-see.
While we don’t believe we’ll see a 2015 rate hike, we must be safe with the Greek issue. We’ve lost count the number of times Greece has sent the markets spiraling lower. The issue may seem resolved, but it’s not.
We’d like to be optimistic but we have to be realistic when it comes to Greece. Europe may release $8 billion in bailout loans to Greece, which will prevent default. The markets loved the news, sending major indices significantly higher.
The news may solve the immediate-term problems, but it cause problems in the future. One, according to CNN, there is not enough emphasis on cutting spending or making the economy more flexible, which has led to previous problems.
Two, Greece won’t grow fast enough or generate enough of a surplus to service its considerable debt any time soon. Greece has the second largest debt in the world based on the size of its economy, notes CNN. Three, Greece may need another 14 billion euros just to carry it through the end of the year.