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Traders channel Bill Murray on Greece, China: 'It just doesn't matter'

Michael Santoli
Michael Santoli

Summer camps are opening their bunks, and stock traders are chanting Bill Murray’s dismissive rallying cry from that classic camp movie “Meatballs”: “It just doesn’t matter.”

Greece’s financial lifeline remains in serious peril, you say?

Doesn’t matter (yet). We’ve been at this five years and it’s hard to draw a direct link between Grexit and American corporate cash flows.

The Shanghai stock market is down 10% this week alone and is beginning to look like a critically unstable speculative casino - is that right?

That’s worth watching – but how much did it really matter to U.S. investors when the Mainland market was doubling over the past year?

The internal action of the American stock market remains a bit ragged, doesn’t it, with those uncooperative transportation stocks bouncing only meekly even as the S&P 500 (^GSPC) advances toward the top of its months-long range?

It’s hard to get too concerned at this point about the rail and freight stocks when they’ve been suffering for months now. And those stalwart groups that held the indexes together in the recent shallow pullback didn’t disappoint in Thursday’s 1% S&P rally: That would be the biotechs, banks and small-caps.

This helps explain why all those global and local concerns failed to prevent the U.S. market from popping nicely higher a day after Fed Chair Janet Yellen downgraded the economic outlook as expected.

What's more, investors internalized the Fed's message of “lower rates for longer,” even after the first hike, and the fresh economic data have so far vindicated Yellen’s faith that growth is picking up as well as her message of wait-and-see as relates to an eventual interest-rate boost.

Thursday’s market action was sort of a “buy almost everything” liquidity trade. Even gold was up nicely, And why not? Core CPI inflation picked up but came in below forecasts, validating Yellen’s data-dependent message of patience. Yet jobless claims and leading indicators were firm, offering a "Goldilocks" tone to the economic evidence.

The broader context, though, is that investors during this frustrating sideways trading period have grown more anxious and confused than one would expect for a market hovering not far from record highs.

The weekly small-investor sentiment poll continues to show a lack of enthusiasm toward stocks and the CNN Money Fear-Greed Index continues to show notable caution. Anecdotally, too, the standard trader tactic after Thursday’s pop seems to be to “sell at the upper end of the trading range,” which shows that the herd isn’t chasing the rally too aggressively.

These are helpful signs of tepid sentiment, though hardly are reason enough to expect significant upside.

Here are a few specific items to keep in mind for the trading day:

  • Stocks have been down on Friday the past four weeks. The last time we saw five straight losing Fridays was October 2012. That could be mere statistical noise, of course, but there it is.

  • Outflows from bond mutual funds in the past week were the heaviest of the year and the cash was largely redirected into stocks. The tantalizing wait for higher rates has investors on edge. This rotation could help stocks in the short term, but also could be viewed as retail traders beginning to capitulate out of “safer” bonds and into an already-expensive stock market.

  • We have some noisy mechanical maneuvers scheduled, with “quadruple witching” stock-derivatives expirations and some index-rebalancing action underway today. It’s not game-able by the average investor, but it might get credit or blame for quick intraday moves or reversals near the bell.

  • The investment bankers remain busy, so deals and new issues will continue dominating until things slow down in mid-summer – if they even do slow down this year. One can never guarantee a “merger Monday,” but the idea that the deal pipeline is packed remains foremost in investor minds and is keeping many from getting too bearish.

That’s a lot to consider. But what makes the markets fun is that we can never know whether, or when, any of it will matter.