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 10 aprile 2012

Market Comment - April 10

(Marco Bonelli) Anything can be borrowed!

You heard it, job growth has been borrowed from earlier this year (due to unusual weather, among others) and retail sales have been borrowed from earlier this year, all in order to explain the recent slow-down as part of the big bull-bear-debate, particularly after the weak labor report from Friday.

Another statement you frequently hear as we approach the beginning of the Q1 earnings season is that "the bar has been set low for earnings..."! Getting back to borrowing, couldn't you also say that earnings growth has been borrowed from the last three years due to unusual factors like major cost-cutting etc.? How about stock market performance - has this been borrowed, too? It could be that deleveraging may get a slightly different meaning!

Finally! As we got the last 4Q11 earnings reports just a few days ago, everybody has been longing for the 1Q12 earnings season and unlike other quarters, where investors had to wait a week after AA reports to see more numbers, this week ADTN, RAD, GOOG, JPM and WFC are already scheduled.

The tremendous earnings growth since beginning of 2009 is partly reflected in the uptrend for all major averages that started in March 2009. The bull market was initially driven by hopes for a rebound from the recession but then mainly driven by double-digit record earnings growth in combination with some hand-holding by the Fed. By middle of February this year, the Nasdaq Composite Index, NDX and Russell 2000 recovered back to the original trend from three years ago. Now, six weeks later, the Dow Jones and SPX moved very close to that trend-line while the Nasdaq Composite and Russell 2000 still trade right at the respective trend; only the NDX considerably broke through. This development would be quite encouraging, only that the uptrend from 2009 mirrored a completely different fundamental picture than we face today, which transforms the 3-year trend into a strong technical and symbolic resistance!

Estimates for S&P 500 earnings growth edged up since beginning of March. At that time, Q1 growth was expected to be slightly negative, now bottom-up estimates call for +0.8% growth. Sure, most market participants expect very little from this season, so the more interesting discussion will be in regard of the 1.7% expected growth for Q2 and the 7.0% expected growth in Q3!

Global macro-economic data mostly below expectations, the Fed in a sort of neutral accommodation stage (here it's interesting to note that the Fed started reducing the Monetary Base end of February and continues to do so, also M1 dropped in February while M2 growth slowed sharply!) and major indexes that started rolling over a few days ago doesn't create a very friendly environment. Now all averages broke below their October and/or November uptrend but the most notable development comes from the broad Value Line Index (the same index that was among the first indicators that completed the head & shoulder formation beginning of August last year!): In the past eight months, the index developed a rising wedge formation and broke the lower support line yesterday, along with another major support level at 363 (high from April 2010 and low from June 2011) and the 50day MA!

Bullish investors and traders may still attempt to buy the dips (using support at 1370.50 and 1356.50 in the SPX, for instance) and AAPL shooting straight to $1000 may create another artificial rally in the technology sector (similar to the intraday rebound we have seen yesterday) but the broad picture clearly suggests a more defensive approach!

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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