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

lunedì 19 dicembre 2011

Market Comment - December 19

(Marco Bonelli) Is Santa Clause still around on Wall Street?

...or to quote Edson Gould, one of the best market technicians of all time: "If the market does not rally, as it should during seasonal periods, it is a sign that other forces are stronger and that when the seasonal period ends, those forces will really have their say."


While there is still some hope regarding an economic rebound in the US economy (as indicated in some economic data and reflected in the outperformance of the Dow Jones Transportation Index), the "other" short-term and longer-term forces are a deteriorating global economy, a deteriorating Euro, re-emerging tension and disagreement in Europe over a fiscal union, funding of monetary emergency vehicles etc., deteriorating earnings growth, underperformance in the Nasdaq (after a number of profit warnings, XLNX and SCHN being the latest), falling commodity prices, bad performance in hyped-up IPOs (ZNGA being the latest), among others.

The point is that all these forces are more or less known to some extent, so the question is how much is already reflected in current prices? This dilemma could be described by looking at sentiment towards a possible rating downgrade in Europe: when you hear comments like "...nothing which has already been extensively advertised...", "...a lot of risk is already priced in..." or "...no significant impact...", sentiment clearly leans to the complacent side. A lot of the other mentioned "forces" are seen in a similar way, as a lot of investors perceive most negative issues as known and old news. General comments about the market last week were also not negative. While not entirely bullish, many comments continued to express hope for a rally unfolding in the near-term future.

The development of the Euro and the development of commodities (two factors where you always ask who the dog is and who the tail is) are probably one of the more interesting ones. Since August 2008, there has been a very close correlation between the SPX and the CRB Index. After November 30, 2011, when investors started to (almost) blindly put their hopes into the hands of global central banks, this correlation got broken - over the last two weeks, commodities sharply declines while the SPX was mixed and only had a few days of weakness. At the same time, considering hopes for a rebound in the US economy, lower commodity prices are clearly a positive sign for economy and earnings down the road.

More short-term speaking, the major indexes are still undecided whether they prefer trading within the old trading range from August/September or finally breaking out of that range and move higher. The last two trading sessions in particular saw sharp intra-day reversals to the downside after a stronger opening. Maybe Friday's option expiration and index rebalancing was a distraction. At the same time, many blue-chips (in the technology and industrial field in particular) pulled back to or even broke critical short-term support levels (IBM, ORCL, UTX, CAT - to name a few - all broke individual moving averages). Finally the Nasdaq still has a major gap to the downside, waiting to be closed eventually (Composite, 2507.72 to 2441.51 / NDX, 2205.72 to 2150.88).

Overall, while season factors and possible liquidity provided by central banks offer some support to the upside, "other" forces and an apparently complacent sentiment continue to work as a drag and justify remaining cautious in the current environment.

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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