Il Primo Ministro greco Lucas Papademos riceve l'approvazione del governo su tagli al bilancio che corrispondono al 7% del Pil nei prossimi tre anni e su una ristrutturazione finalizzata a ridurre di €100 mld gli oltre €200 mld di debito detenuto dai creditori privati, atteso il voto del parlamento • Standard & Poor's declassa il merito creditizio di 34 banche italiane tra cui UniCredit a BBB+ da A, Intesa Sanpaolo a BBB+ da A e Banca Monte dei Paschi di Siena a BBB da BBB+, S&P anticipa "una redditività decisamente debole per le banche italiane nei prossimi anni" • La produzione industriale italiana aumenta a dicembre +1,4% da novembre +0,3%, oltre le stime degli economisti +0,5%, anche se i dati del quarto trimestre -2,1% suggeriscono che la terza economia della zona euro è entrata nella seconda recessione dal 2009 • I Btp decennali salgono per la quinta settimana consecutiva, il periodo di recupero più lungo in oltre cinque anni, la prossima settimana il Tesoro vende €4 mld di buoni al 6% con scadenza 2014 • L'euro cala dal massimo di due mesi contro il dollaro, il mercato azionario europeo cala dal massimo di sei settimane e l'azionario Usa registra la prima settimana di perdite del 2012 dopo che i ministri delle finanze europee non hanno concesso il pacchetto di aiuto necessario a prevenire il collasso economico della Grecia

venerdì 12 agosto 2011

Market Comment - August 12

(Marco Bonelli) Will 24 or 11 cents in the SPX decide if the rally will last another day or not?

After the FOMC announcement on Tuesday the SPX reached a high of 1172.88 and closed at 1172.53 following a monster intraday reversal. Yesterday, the SPX broke out of these levels, reached a high of 1186.29, but closed at 1172.64, 24 cents below Tuesday's high and 11 cents above Tuesday. I only mention it because many traders watched that level to determine if any kind of rebound might have more legs or if we give up some of yesterday's gains again.

Alright, that was meant to be more an ironic and humorous entry-line so let's get real and talk about Dollars and not Pennies! Is this bounce for real? Let's do a survey! Please respond and let me know.

Here are the options:

Option 1): Yes, the bounce is for real and we have seen the bottom!
The major indexes tested the lows three times this week and broke above some resistance levels now / value investors and bargain hunters find plenty of stocks to buy (with many stocks trading below book-value) / earnings remain strong and valuations are compelling / research analysts upgrade numerous stocks / broad-based insider buying is the heaviest in more than two years / worries in Europe are calming down as country leader commit to structural changes and austerity / CSCO is almost a symbol for the market, negative sentiment and already written off, Wednesday's quarterly results prove something different / bond-market is finally acting as it should, selling off with money flowing into equities / financials are finally leading the market higher (up more than 6% yesterday and almost 10% on Tuesday) / July retail sales were reported better than expected which shows that the consumer is not dead, also favorable Q2 results from M, RL, JWN, JCP throughout the week / commodity prices will ensure that earnings stay strong and will help that the economy recovers towards the end of the year into 2012.

Option 2): No, the bounce is fake and the market will retest the lows or even go lower!
Some technical rebound was necessary after two weeks of sharp declines / the head-and-shoulder top formation for many indexes is major and although prices dropped to the calculated target levels as an initial move, the rebound will run out of steam / arguments like strong earnings, cheap valuations or no double-dip-recession are nothing more than making up reasons to explain why the market is moving higher / too many market players jump on the stage and call the correction over / interventions in Europe like ESMA's ban on short-selling ignores the problem and will eventually turn out to be contra-productive / when prices recover, the trigger for the market correction and the result get mixed up and the trigger, why the market came down in the first place easily gets ignored or forgotten: a global economic slowdown that already lead to flat to negative GDP growth in many developed countries in combination with developments in Europe / the sovereign debt crisis in Europe and the health of European banks will remain a major concern for a long time / the recent macro events are not reflected in any economic numbers, yet/  although it was a big decline, a 15% to 20% correction in context of the rally over the last two years is not that much, relatively speaking, especially as the market already caught up 1/3 from the lows on Tuesday.

For today the consumer sector remains interesting and worth watching. While retail stocks mostly reacted to individual stories so far and lower commodity prices weren't mentioned as a broad catalyst to much, the better than expected July retail sales report and the positive revision for June could help the overall sector.

Beside that, later today and into next week, let's see which scenario plays out!

Trade well, have a great weekend and I'm looking forward to receiving many responses for the survey.

(Marco Bonelli is the Managing Director - International for CL King & Associate in New York. The opinions expressed are his own)

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