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 27 aprile 2012

Market Comment - April 27

(Marco Bonelli) Let's redefine the road map for the short-term picture:

How about a short-term rally to new highs within a consolidation / correction trend instead of a short-term correction within a bull market trend?

Stronger earnings growth, moderate economic growth (as officially confirmed by the Fed this week), continued hopes that housing has finally seen a bottom and the recovery will go on (more or less confirmed after better than expected pending and new home sales for March and also mentioned in the latest FOMC statement) and most importantly cautious to negative sentiment on back of a deteriorating global macro environment and mostly cautious earnings outlooks for Q2 could provide enough fire-power to lift the major averages to new highs!

Despite mostly disappointing macro-economic data (including GDP for Q1), there are important trends to take into consideration: consumer spending has turned out to be surprisingly solid (as confirmed in a 2.9% growth for personal consumption in Q1) throughout the quarter and housing continues to show signs of life! While business investment and manufacturing carried the economy out of the slump, representing less than 1/5 of economic growth and the global economy sliding, there are definitely limits to how much manufacturing can support the economy (interestingly, business fixed investment were down in Q1!). A sustainable economic recovery is only possible with the participation of consumer spending (which now contributes to almost 70% of economic growth) and housing & construction. Personal Consumption up 2.9%, Housing Investment up 19% in Q1 keeps hopes alive!

The last two trading days showed some interesting underlying strength, driven by cautious / hesitant investor behavior but backed up by some positive news. The Dow Jones and SPX almost back up to the highs from beginning of April, the Nasdaq above the short-term downtrend from April and all major averages (except the Value Line Index) above their 50day MA looks a lot better than it did beginning of this week. So new highs for most indexes appears to be a valid possibility!

But now comes the tricky part: consensus expectations embraced a short-term correction in the stock market and although many investors appear cautious now, hopes (and high expectations) for the second half of the year are probably well alive - in other words, it's likely that sentiment switched from short-term negative to short-term positive very fast. In case the market breaks out to new highs, expectations for the mentioned consumer spending, housing but also business investment will reach overly aggressive levels, global economic trends will get completely ignored, earnings estimates will get revised higher and stock prices will move even further away from fundamental reality than they are already now - that's when the consolidation / correction that started some time in March possibly resumes.

So it's a short-term rally, maybe a few days, maybe two or three weeks. The SPX might see 1450/1460 in a broad-based move (led by financials, consumers, energy and selective technology, industrials). If the GDP news and earnings disappointments like SBUX lead to some early weakness, buying the dips should turn out to be a good strategy, especially for traders!

Trade well and have a great 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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