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

martedì 18 ottobre 2011

Market Comment - October 18

(Marco Bonelli) For IBM, good is definitely not good enough! - For BAC and GS, bad seems to be "the worst is over"!

After numerous quarters of handily beating EPS and revenue estimates and the stock even closing at a new all-time-high last Friday, it's a classic case where expectations have been set too high and the company couldn't deliver.

Another example is China's Q3 GDP growth at 9.1%, quite a bit below estimates. With the last four quarters averaging around 9.6% and the miraculous expansion only taking a dip end of 2008, beginning of 2009, expectations probably have also been set a bit too high and the growth machine couldn't deliver. Still, industrial production in September exceeded estimates, but the GDP clearly weighs more.

Here are a few observations regarding yesterday's market performance that saw the biggest gainers in the last two weeks (basic materials, financials, industrials and technology) loose the most:

- Most financials (JPM, C, WFC, BAC) so far just made their earnings by applying multiple accounting gimmicks; ex special gains and other items, most reports fell short of expectations. GS was a nice exception to that rule as they had nothing to hide a catastrophic implosion of earnings and revenues, worse than the worst expectation. In light of weak Q3 results (despite sharply lowered expectations), the BKX, that rallied 22.1% between October 4 and October 12, already lost 8.3% in the last three days and also broke again below its 50day MA.

- Back to IBM and the technology sector. The Nasdaq Composite and NDX were the only major indexes that broke out of their August/September highs. In that 16%plus move, both indexes opened up three gaps and the NDX came 2.8% close to its 10 ½ year high from July. Finally, the NDX also broke slightly back into its 2-year uptrend from beginning of the recovery after the recession - not only a technical but also a very symbolic move. For the moment, this is already past. The market rolled over, AAPL lost $10 in one hour, the NDX once again broke its 2-year uptrend (2350), fell below the September highs at 2337.70 and also closed the first gap at 2330.60.

- While the major indexes moved higher over the last two weeks, NYSE and Nasdaq trading volumes steadily declined each day - not a indicator of real strength.

- One word about Europe, another case where -once again- becomes clear, that optimistic expectations couldn't get met. Now the ambitious goal of delivering a master-plan by Sunday meets more and more skepticism and reality kicks in that the European debt crisis might not be over (surprise!). With that the Euro also started rolling over after advancing from 1.315 to almost 1.39 in the last two weeks. End of last week, the currency ran into its 3-year downtrend (1.3910), its 50day MA (1.3910) and several other technical resistance levels between 1.3840 and 1.40. Hopes are still high that the European Commission will produce something by October 23, but if expectations don't get met, the Euro might have another leg down. In the past, correlation between the Euro and the SPX was very close.

Although most of these observations indicate more downside, yesterday's sell-off probably gets more seen as necessary profit-taking from over-bought conditions and just a little interruption of the rally. In the pre-market, the perception towards bad earnings from BAC and GS also appears that it cannot get a lot worse (both stocks trade above yesterday's close in the pre-market). If the rally resumes or if it ran out of steam yesterday, current levels still reflect relatively high expectations. Within the last days, a lot of these (optimistic) expectations didn't get met. If this development becomes the norm, the rally from the lows last Tuesday was only built on hot air. Watch out!

Trade well.

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

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