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 5 agosto 2011

Market Comment - August 5

(Marco Bonelli) Almost 11% off the recent highs, another 4 to 5% more to go to complete the famous head-and-shoulder formation!


While the velocity of the move is kind of surprising, the direction is not. The fact that the market didn't show any real attempt to hold short- and long-term technical levels (just to pick one example, the SPX didn't hold the June lows at 1258 and crashed right through 1250 and yesterday's lows at 1234.50) can be seen as a mirror of the very serious macro uncertainties around the world.

The key message probably is: The macro-environment is NOT priced into prices yet because nobody knows how everything will develop from here and where it ends. This uncertainty basically erases the valuation argument we often hear.

One of the most basic questions is: Where should growth come from when the corporate sector as the only driver starts cutting back on capital investments (as they do) and orders get cancelled (as some have seen in the past two months)? The private sector continues to suffer from unemployment, deleveraging and inflation and the public sector can't afford to spend anymore but has to employ severe austerity measures. Unfortunately the deterioration of one part of the system will lead to the deterioration of another part and the downward spiral continues.

Another question is, if in this environment, central-bank intervention is a good thing or a bad thing. Various central banks already got busy with currency interventions in the last days and the ECB announced a "special 6-month liquidity operation", actively buying bonds without calling it quantitative easing. At least today the market reaction is obvious. Did sentiment turn and a possible QE3 announcement will be interpreted as an acknowledgement of failed policy and a macro-crisis?

There are many stories out like the collapse in energy prices, the intraday reversal of gold and silver (raising the question if the real safe haven is maybe the Dollar), the biotech sector falling off a cliff, technology heavyweights like GOOG, AAPL, IBM and AMZN actively participating on the downside (opposite to their bell-weather status), emerging markets joining the correction (South America down 5% across the board and emerging markets in Asia joined this morning), however at the end, market participants try to figure out at which levels prices start stabilizing again. Short-term speaking, valuation measures are pretty much useless, so a look at the broken charts will give at least some answers: The first stop, the highs from April 2010 already got taken out by the SPX and Russell 2000 while the Dow Jones and S&P400 Midcap closed only slightly above. Finally the Nasdaq Composite broke the lows from March and June this year. As a very classic head-and-shoulder formation unfolded for many major indexes, the calculated downside would be another 4.8% in the Dow Jones to 10850, 4.1% in the SPX to 1150 and another 4.8% in the Value Line Index to 320, just to pick three examples. The Nasdaq is harder to read, but the charts suggest anything between 5 and 8% downside. Needless to say, these are calculated support levels and don't necessarily represent a bottom!

Now, this is the technical picture. Luckily there are many more moving parts that make the whole game sort of exciting but unpredictable. Although it will take some time to form a base, a rebound rally could unfold anytime. In the desperate search for the famous catalyst to step into the market again, often there is none. It could simply be sentiment or some shifts in asset allocation, nevertheless one development is already a highlight: Falling energy prices will bring the energy sector down but will help almost every segment of the economy and could be a trigger down the road for investors to step in again.

At this point, the payroll number probably doesn't really matter too much and investors will only pay attention if it's either negative or north of 200k. In each case, you will find arguments for the market to move in either direction. With that, the more interesting upcoming event might be the FOMC meeting next Tuesday. Or maybe we even see an announcement out of one of the many emergency meetings over the weekend!

Trade well and have a good weekend.


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

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