Hey where is the party? Should we not be celebrating? Greece got its bailout! Yippee! Where is that risk-on play? You know, the one that reflects the new economic rule that bailouts are bullish? Should we not be basking in the shadows of a sigh of relief rally? What gives?
Well it seems that the bailout play has lost a little magic. Perhaps because the market is not sure that the terms of this Greek bailout is actually going to work. For one thing it seems that the deal centers on a more than optimistic assessment of Greece’s ability to buy back their bonds. In fact the International Monetary Fund has said that it will withhold its support for the deal until it is clear that Greece can actually achieve what the optimistic EU leaders believe that they can. So it’s a deal, but not really. We've got kind of a risk-on trade, but not really.
Options expire today on heating oil, gasoline and natural gas. The markets seem to want to rally but may have to scare some short put and call buyers before they achieve what should be a sizable upward move. A lot of talk about weather reports that have gone from cold back to warm again. It seems the weather forecasters have had a tough time predicting the weather lately. A few weeks ago natural gas was soaring as forecasters gave traders the impression that we're getting ready to enter a new ice age. Now we will be bemoaning global warming again. All I know for sure is that I needed my earmuffs this morning in Chicago!
I also know that the supply of heating oil is dangerously tight and the supply of natural gas is near record highs for this time of year. We feel the next big move on petroleum is on the upside and for natural gas, on the downside.