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 7 marzo 2012

Market Comment - March 7

(Marco Bonelli) Could you leave Greece alone and acknowledge the global economic slowdown?

Whether Greece should be blamed for the global economic growth deceleration / partly stagnation, partly recession or just seen as a small piece in the complex economic puzzle is a standalone discussion that will fill a whole night, but it's not extremely helpful to use the Greece argument for everything that goes wrong in the world economy.


Fact is that global economic growth started visibly slowing about a year ago, recent data from China, Brazil, Australia and Europe confirms that which makes the economic recovery in the US even more crucial and every single economic data will be even more scrutinized. The February ADP Employment Change number confirmed the economic recovery but are investors up for it to step in right away and buy the market after yesterday's sharp pull-back?

Sentiment once again became a very crucial factor and the magnitude of yesterday's sell-off and the resulting change in mood could make this step a bit difficult. To start at the beginning, the media reaction and comments throughout the day displayed shock, surprise and even fear. Excuse me, this was the first major down-day in the stock market in the past almost three month and weren't most market participants talking about some kind of short-term correction for a while?  So acting as if this came out of the blue citing deep concern about global economic growth and "what's happening around the world" is a bit naive or did complacency blind even more market participants than anticipated?

Interestingly later in the day, a few calls came out to buy the weakness, calling it a great opportunity for all those who were still on the side-lines to finally step in. Unfortunately psychology doesn't work like that and all those who said last week and two weeks ago that they will buy into weakness usually don't step in and buy because they are afraid it might drop even more.

Something investors cannot ignore is some fairly dire developments:

*         Market breadth - the worst advance / decline ratio on the NYSE since August last year (with one equally bad day beginning of November)!

*         Trends broken - more short-term broken up-trends, but yesterday was the day where also many 50day MA got broken to the downside!

*         Commodities - sharp declines in metals and energy prices which pushed the CRB Index slightly below its up-trend from 2009! Did investors play the global economic recovery over the last months or did commodities get mostly pumped up on speculation?

*         Asset-allocation - a big shift out of stocks back into bonds, not surprising but given the massive inflows into bond funds over the last months, not a real supportive statement for the much more attractively valued stocks!

Here are a few more details regarding broken trends: After the Dow Jones Transportation Index confirmed a break of its 50day MA on Monday, the Russell 2000 broke its 50day MA (today at 793) yesterday, consequently following the underperformance of small-caps. The often ignored Value Line index closed right at its 50day MA (today at 353). Finally the Nasdaq Composite gapped down and broke again below its up-trend from 2009 (after cracking the line on February 9 and famously creeping higher to the 3000 mark last week). Cyclical sectors showed the weakest performance and almost all sub-sectors, including the broader S&P Capital Goods Index now trade below their 50day MAs. The technology sector and semiconductors in particular also see strong profit taking and the SOX and NWX Index already broke support levels.

As investors keep on wondering if the rally is over, if yesterday sell-off was just part of a short-term pull-back, if it was simply a little pause and if risk is on or off, today and tomorrow will likely be one of those famous wait-and-see days before we get the second round of labor market data on Friday. Given the final acknowledgement of weak global growth and the necessity that the US economic recovery doesn't slow down, potentially disappointing economic statistics become an even bigger risk for the stumbling stock market.

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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