Wealthbuilder Stock Market Brief 17th. July 2015

Market technical weakness continues.

The expected oversold technical bounce due to recent market weakness materialized this week.

With the good news from Greece spurring sentiment on, the NASDAQ has just jumped to new

highs with the Dow 30 and S & P 500 not too far behind. Nothing unusual here. However, just

like a clay mound in the Australian desert that is being burrowed out by termites the American

stock markets apparent strength is actually being hollowed out by technical failure.

Despite a collapse in the price of oil, the Dow Transports continue to languish and if ever you

needed an example of Dow Theory divergence in the flesh just look at the comparison chart

below. This discrepancy in price behavior is not good and the longer it persists the more risky the

market is going to become.

The % of stocks below the 200 PMA (Price Moving Average) continues to consolidate below its

200 DMA (Daily Moving Average). This price action is bearish.

As I have regularly mentioned in the past there will be no significant market correction without a

warning breakdown in the NYSE Advance/Decline line. Currently the 50 DMA line and the

100 DMA line are trending down with the 100 DMA becoming a point of resistance rather than a

point of support. This is bearish price action.

Accordingly as mentioned in the last brief I would advise investors to be cautious with this

market. It is my growing belief that the current strength could disappear at any moment like

termite dust dissolving in a desert storm.

Chart: Dow 20 Dow 30 Comparison: Daily.

Chart: % of stocks above their 200 PMA: Daily.

Chart: NYSE Advance/Decline Line: Daily.

Chart: QQQ: Daily.

Greek crisis finally resolved, somewhat. With Greek banks due to reopen next Monday by agreement it appears the Grexit crisis has

finally been sorted out by the Euro partners. What a terrible three weeks it has been for Europe. I

have never been so ashamed that Ireland was a member of the European Union. To observe 17

Euro-Group countries, (with the exception of France), gang up and humiliated a small nation of

12 million souls was utterly disenchanting. How did it come to this I asked myself? Poor

pensioners were made to stand in line for up to 5 hours, in sweltering heat, to receive a paltry

pension. Average citizens, who had many thousands of Euros in their bank accounts, were made

to queue to withdraw a maximum of 60 Euros per day, whether they lived alone or had a family

of 10 children to feed. Businesses were forced to close due to the lack of proper commercial

import/export clearing services. All of this ordered, not by Greek parliamentary rule, but by

decree from the ECB, Berlin and the German Bundesdag. Greek citizens finally woke up to a

new Euro reality. For them European democracy had been reduced to a fantasy. Greek citizens

finally came to realize that their sovereignty had been stripped bare by a foreign financial

oligarchy. Force had replaced agreement and consensus. Living had become survival.

Cynicism had destroyed hope.

Despite the anguish described above by no means has the fundamental problems underlying the

Greek crisis been tackled. No, today Greece merely has received emergency funds to allow their

banks re-open until mid-August, subject to a more comprehensive third bail-out package being

negotiated. Greece will now be saddled with a new round of unsustainable debt and more

crushing austerity. No country has ever repaid a debt level that is 200% of GDP. Every

international banking institution knows this yet no debt leniency has been granted to the Athens

government. As we speak a civil war of sorts has broken out between the IMF and the ECB.

Last week the IMF leaked an internal report outlining the need for significant debt relief being

granted to Greece to allow the Government return to the international bond market. Berlin will

hear none of this. Wolfgang Schauble, the German Finance Minister, has put it on the record that

he fears that granting debt forgiveness to Greece will create a precedence that will motivate

requests for debt hair-cuts by Ireland, Span, Portugal, France and Italy. This development, he

believes, will lead to the collapse of the Euro-Bond market. How all this will play out is

anybodys guess.

I believe the heart and soul of the European Union was publically destroyed over the last three

weeks in Athens. Accordingly I reckon it is only a matter of circumstance, probably the crises of

the next major world recession, which will force the Euroland body to finally give up the ghost.

Charts courtesy of Worden Brothers.

17th. July 2015 Christopher M. Quigley