A Week of Recovery for the Marketplace Comes to an End
Dow Rallies Back Over 18kIn a piece of news that has been a long time coming, the Dow has closed the week over the 18k support point. After dropping below it a couple of weeks ago, and staying there because it couldn't put together an effective rally, the numbers are finally up.
Most analysts, myself included, thought that the Dow would spend the summer hovering around 18k. But the Greece crisis and some technical issues on the trading floor both took their toll and put a stop to any rallies. This week has been a lot quieter, despite the coming deal with Iran, and it's given the market a chance to consolidate.
There is an old saying, and one that isn't entirely accurate, that says “Sell in May and go home” because summer trading tends to be sluggish.
Greece Makes A Deal, But Is It Enough?Earlier this week, Greece sealed the deal on their third bailout. While it will be enough to reopen banks, it's too soon to say whether this latest round of bailouts will keep them in the European Union. That could be important, because if Greece exited the Union it might start a destabilizing force that causes chaos to spread.
The force I'm talking about isn't political or social, it's monetary. If Greece left the union, nobody known what that would mean for the Euro. It's already trading about as near to record lows as possible, down to $1.0849 per Euro on Friday from highs of over $1.80. The Euro is a powerful currency, with some of the most productive nations on Earth -- I'm thinking here of Germany -- using it to buy and, more importantly, sell their goods and services overseas.
If the Euro keeps falling and Greece exits the Union, there's no telling what countries like Germany might do. Their exports are already being battered because of the currency devaluation. Would there be anything keeping them in the European Union? Or would they prefer to go back to independence and the Deutschmark? These questions could have an overwhelming impact on the European markets, let alone the political implications of a collapsed Union.
All-Star Stocks At 52-Week HighsAn incredible list of tech stocks are now trading at all-time highs. Google (GOOG), Amazon (AMZN), Time Warner (TWC), Netflix (NFLX), and Facebook (FB) are among the stocks at their 52-week highs right now. If you take a close look, you'll see how many tech companies are represented. It's no accident that the NASDAQ has been having a record-setting week when you consider performance like this.
Iran Deal Hasn't Moved Oil -- YetOn Tuesday the rumblings began. There could be a deal with Iran in the works, and one that would allow them to export their oil again. So far, the news hasn't really affected crude prices, but that could all change once more details become public and a timeline is set. Right now, oil prices are so low because both America and OPEC are producing record amounts. In fact, we're producing more than we can use, and our stockpile is growing. That's impressive, especially since demand rises over the summer.
Since supply is outstripping demand even at peak times, adding another supplier to the marketplace could cause a crude oil crash, or at least a dramatic readjustment in the floor. Crude has found a floor at the $50 support level, and it's trading just above it. But a steady supply of Iranian oil in the marketplace could cause that floor to fall as low as $35 per barrel. US consumers should be pleased with the deal, since gas prices will begin to fall again. Energy companies, however, are another story.
Published on Jul 18, 2015By Aaron Phillips