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

giovedì 25 agosto 2011

Market Comment - August 25

(Marco Bonelli) Skepticism and overly cautious comments on almost everything lifted stocks higher the last two days and might lift prices higher even into next week!

Never-ending debt issues in Europe (debt yields, CDS rates etc.), mixed durable good orders (only better due to aerospace, defense and automobile orders), rising jobless claims (although there were a few Verizon workers included), Steve Jobs resigning as AAPL's CEO, horrible order numbers and guidance from AMAT, revisions to growth wherever you look (from GDP to PC unit growth etc.), weak back-to-school sales and here comes the highlight: Ben Bernanke probably won't announce QE3 tomorrow - basically every data point gets used to justify the levels stocks currently trade and why any rally should be sold - for the apparent reasons.

Ok, there is the fundamental picture which is quite frustrating. However, most of the points have been discussed in length and many market comments in the past two weeks argued that all the bad news is already in the prices. Well, it depends how you define "all the bad news"! Sentiment definitely changed over the past two weeks. While the stock market now probably reflects a lot of EXISTING facts and KNOWN issues, there are still plenty of unknown variables in terms of outlook that are not reflected in the prices simply because it's uncertain how these unknown variables will look like. Just as a quick reminder, here are some of the open questions, but you can only discuss a possible outcome that much and that long - at one point you just have to wait how the situation develops:

Ø  How long will the global economy stay weak and how much weaker will it get?

Ø  Will one or a few European banks blow up?

Ø  Will one or a few European countries be forced to exit the Eurozone?

Ø  How will business and consumer sentiment change economic activity?

Ø  How will everything be reflected in Q3 and Q4 earnings - consumer spending, orders, production, earnings etc.?

Here is the point: The stock market may have reached a stage where it might only move substantially lower once data and facts support the negative outlook but right now, all the negative news investors get confronted with is part of the "existing facts and known issues" - nevertheless it gets interpreted as new news but obviously doesn't have any substance. This is probably the biggest reason that explains the resilience the market showed in the last two days. You add a possible double-bottom chart formation, the highest ratio of stocks trading below the 50day and 200day MA in decades, spiking short-ratios on NYSE and Nasdaq and a gap in the Nasdaq indexes that longs to get closed and prices move higher (either the straight way like on Tuesday or with a few intraday detours like yesterday).

One last comment in terms of sentiment: almost everybody expect the market to sell off if Ben Bernanke just repeats the statement from the FOMC meeting and doesn't give any more hints in regard of bond buying. While the initial reaction might be negative if the described scenario unfolds, given the current sentiment, I wouldn't be surprised if the market turns higher once again, either in another intraday reversal or latest on Monday in a second-thought reaction. We will find out tomorrow!

For traders it may be worth staying long and keeping on riding the momentum and also use any Jackson Hole-triggered weakness to buy. For investors, possibly lower prices as a result from upcoming data confirming a more negative outlook could be used as a better buying opportunity.

So once again,  Nasdaq Composite, 2511.50 and NDX, 2159 - here we come!

Trade well.

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

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