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 18 novembre 2011

Market Comment - November 18

(Marco Bonelli) Enough nice-talking and bright-painting...

...the major averages will decline another 6 to 8% over the next couple of week before any kind of year-end rally might start, depending on the circumstances.

The last two trading days not only caused a lot of damage to chart pictures of all major indexes, it also revealed some developments that could become trends:

Finally, contagion no longer gets perceived as a European internal phenomenon but the discussion picks up which impact the developing fundamentals in Europe have on the US and the rest of the world. Nobody knows how the fundamental landscape in Europe looks like next year so there is a tremendous uncertainty (and probably risk to the downside) overhanging any micro-size progress on the political front. In this context it is very dangerous to label the recent better than expected economic data in the US as a sign that the US economy is immune to the developments in Europe (in 2010, the combined GDP in the European Union was more than $ 16 Trillion compared to $14,5 Trillion in the United States!).

In fact the recent data is very confusing and sends contradicting signals. Although some consumer data pointed slightly to the upside, the fact that better retail spending occurs by tapping into savings and against a backdrop of slightly declining real earnings and recently recovered energy prices (heating oil for instance is 32% more expensive today than it was a year ago - welcome to the heating season!). A look at the November Philadelphia Fed Index showed similarities (lower new orders, higher average work-week and higher 6-month outlook) but also discrepancies (the Phili Fed showed lower shipments, higher inventories and higher employment) to the Empire Fed Index. As these manufacturing data are very much based on sentiment and expectations, it is obvious that managers are as confused and know as little as everybody else.

Q4 and Q1 earnings estimates continue getting revised to the downside, leaving earnings growth decelerating sharply from the mid-teens to the mid-single digits. Although investors currently don't focus too much on earnings any longer as they are just glad that the Q3 reporting season is almost over, companies will start updating their Q4 guidance in a few weeks from now and those international corporations with exposure to Europe may have difficulties to make their quarter.

The chart picture could be described the following: All major indexes but the Dow Jones broke the highs from September to the downside (and with that various other technical support levels and moving averages) and fell back into the trading range from August/September. At the same time, the well-discussed bullish flag-formation got crushed and neither exists any longer nor sends any bullish signals any more. Furthermore the Nasdaq, driven by the technology sector on back of disappointing Q3 earnings, sharply underperformed the SPX in the past two days and the Composite broke through the crucial 2600 support while the NDX broke 2300 and closed below its 200day, 100dau and 50day MA!

While there is option expiration day today and futures are indicated higher, it's unlikely that investors are interested in adding to their long positions ahead next week's deadline for the Super-Committee to come up with a plan for budget cuts, dismal fundamental data from Europe (and new governments like the one that will most likely get elected in Spain this weekend or the recently appointed technocratic governments in Greece and Italy can only try to manage the recessionary forces but won't be able to reverse them) and in the face of broken chart-pictures. Although history suggests buying early during Thanksgiving week and selling on Black Friday, there are always exceptions to the rule...

Trade well and have a nice weekend.

(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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