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 25 ottobre 2011

Market Comment - October 25

(Marco Bonelli) "As things stand at present, I understand that the full package may not be ready by Wednesday..." - Surprise!!!

Anyway, as this phrase of a letter from the head of the Eurozone Finance Ministers is not surprising at all, let's move on to the next subject.

Dow Jones on pace for best monthly performance ever! - Surprise!!!

This is indeed surprising but mostly painful for a lot of investors who did not fully participate (because they were and still are cautious) or were not able to fully participate (because they are more or less fully invested) in that rally. Whether the argument about the hundreds of billions of Dollars parked on the side and waiting to get invested is true or not, fact is, investors were definitely holding back fire-power where it was possible and put some money into less risky assets, so there are definitely funds to be invested while existing portfolios are underperforming every day and more and more investors simply can't afford to stay out of the game. So liquidity and performance pressure might be the reason why the rally is not over.

Talking liquidity, it's also worth mentioning that the monetary base rose last week, which was the first time since July that the Fed expanded the broad money-supply. As this is just a preliminary reading for one week, it is too early to say if this is the precursor for QE3, that some Fed officials talked about last week.

The need to be invested certainly doesn't get facilitated by the ongoing conflicting messages from the Q3 earnings season and the fact that all major indexes currently face a number of technical resistance levels. The Dow Jones and Nasdaq Composite trade close to their 200day MA; both, Dow Jones and S&P are close to their 61.8% Fibonacci retracement levels; the Russell 2000 and S&P Midcap Index moved up to their 100day MA (by the way, small and mid-cap names played a nice catch-up game in the last three trading days after lagging most of the rally since October 4th). There are plenty more resistance levels to mention, but while it's certainly necessary to follow the charts, the point is that a cautious sentiment with investors hesitant to step into the market after 15 to 20% performance (and more) usually makes technical levels less relevant as the market causes the most pain when it simply blows through the levels everybody was hoping they trigger a mild pull-back.

Unfortunately investors also have to deal with Europe, which is always good to move indexes around the world by 2% to the up and down-side on a snap shot these days. If a comprehensive decision will in fact be postponed once again (as some comments and letters already suggest something like that) it could really cause substantial profit taking. But until the world hears from the EU Summit tomorrow, any weakness will probably be used as a buying opportunity as part of some more window-dressing for the end of the month.

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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