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

mercoledì 19 ottobre 2011

Market Comment - October 19

(Marco Bonelli) The rally is not over before it's over!

...and: Congratulations to INTC (it should have said AAPL, but that didn't work out as planned) for an outstanding quarter!

It really gets confusing:

Earnings in the technology space appear alright, GOOG, EMC, VMW, CHKP and INTC reported better but investors also got presented shocking misses by IBM and now AAPL (the first miss since 4Q08).

Earnings in the industrial space are surprisingly strong, PH, TXT and UTX reported better (PH in particular mentioned that they saw a rebound of international business in September). This, together with some ongoing optimism regarding the state of the economy and upward revisions for Q3 GDP lifted cyclicals and the Dow Jones Transportation Index up substantially.

All developments from Monday - financials missing low expectations and trading lower, the Nasdaq rolling over after hitting multiple technical resistance levels, declining trading volumes and also the Euro pulling back after an almost 6% advance versus the Dollar - got reversed to the opposite again yesterday. Financials, industrials, energy and basic materials were the best performing sectors in the SPX and without IBM (58.20 points the Dow Jones), the Dow would have been up more than 238 points.

Just in time, when expectations for a comprehensive package to address the European crisis by October 23 started fading, reports about a rumored agreement to raise the volume of the EFSF came out - once again well timed for the last hour of trading.

The last point probably mirrors the current market sentiment best: although it's objectively almost certain, that European leaders won't come up with anything definitive or even clear measures to solve the European crisis (it's often referred to a debt crisis but in fact, it's an economic, debt and in many ways also a political crisis), reports like last afternoon are the usual bubble stories that just get used as another reason to buy the market. While there was plenty of reason to rally the stock market so far, the market now entered the popular state of ignoring the negative and talking everything nice. No matter which kind of negative data or news comes out, it's "not so bad", "it's not as bad as feared", "it reflects low expectations" or "the long-term outlook continues to be very positive". Although AAPL is in a world of its own (and investors probably really don't have to worry about the next quarters), the disappointing numbers also get explained, turned and twisted and the majority of recommendations call for buying the weakness.

With all that, the momentum of the "risk on" and "way of least resistance" rally may easily move prices further up as ignoring any negatives and talking things up could last a little bit. In this context, 1250 / 1260 in the SPX appear possible. So while a few trading positions make sense, is it smart to buy now, close your eyes and wait until the market made another three or four percent? Probably not as sentiment changes by the hour. Is it still smart to take some profits and lighten up on another move higher? Probably yes.

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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