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

giovedì 10 maggio 2012

Market Comment - May 10

(Marco Bonelli) Does the market hear the screams for a rebound?

Ø  The market is due for an oversold bounce.

Ø  The market showed intraday strength after weak openings on three consecutive days.

Ø  The Dow Jones, SPX, Nasdaq Composite and S&P 400 Midcap held above their 100day MAs.

Ø  Yesterday, the SPX and NDX defended the lows set on Tuesday (1347.75 and 2587.50, respectively).

Ø  Sentiment figures (AAII (small investors) and II (newsletter writers) show extreme bearishness.

Ø  Some bears throw in the towel after seemingly endless intraday rebounds and only moderate losses despite a lot of negative news.

Ø  Energy prices showed a late rebound which helped the energy and basic material sector recover.

Ø  Bonds also showed a late reversal to the downside, which helped stocks thanks to asset-allocation shifts.

Ø  Kind of worthless to mention, but yes, reports that Greece receives the agreed European rescue package at least got the media excited and maybe some traders jumped on it.

Ø  European stock-markets show the same rebound after sharp losses following exaggerated fears over the Euro and the political and economic landscape on the Continent as well as industrial production numbers from France, Italy, UK and the Netherlands that were not worse, even slightly better than expected.

Indeed the futures indicate a slightly better opening, thanks to a dramatic 1k drop in weekly jobless claims, which turned out to be another 1k below consensus expectations and clearly shows that the recovery in the labor market is progressing, isn't it?

First of all, the market is not oversold. Unless you are a HF trader who jumps on each and every "trend" that lasts longer than a minute, the market dropped on six consecutive days and that's it. The intraday rebounds from the last three days already worked off some of the short-term "oversold" condition so if we talk of rebound it will be a bounce off technical support levels hoping that at least chart analysis works in an environment where nobody knows what else to do.

Sentiment certainly plays a big role and too many bearish calls and too much bearish news wears off after some time, but again, listening to and reading many comments you almost get the feeling that the investors have to suffer through this agony for weeks. Wasn't the world (including sentiment figures) alright just a week ago, before the ISM Non-Manufacturing Index was reported on May 3rd, 10.00am EST?

So in this fast-pace environment, to which degrees will the technical rebound navigate the latest negative news?

Ø  China's export and import data was very disappointing and way below expectations

Ø  The Dow Jones and SPX closed below their highs from May 2011 (12876 and 1370.50, respectively)

Ø  The Nasdaq Composite and NDX closed below their April lows (2946 and 2629, respectively).

Ø  Although the April lows were only slightly broken, the question is valid as CSCO disappointed big last night. Guidance for Q2 and comments about the IT spending environment and the order picture were very downbeat

Ø  The Russell 2000, Dow Jones Transportation Index and Value Line Index closed below their 100day MAs.

Ø  Market breadth continues to be disappointing, in fact, one of the big differences between Tuesday's and Wednesday's rebound was that market breadth stayed solidly in negative territory yesterday.

Sentiment and liquidity are only the dominant market drivers as long as the fundamental picture is stable. With fundamentals deteriorating, sentiment and liquidity only have a temporary effect until development catch up to fundamentals again. With that and on back of CSCO extremely poor guidance, we could easily see an opposite move to what we have seen the last days: instead of low opening and intraday rebound, how about a higher opening and an intraday sell-off?

As one trader once said: "Sell in May and go away - however, no one ever said it was the beginning of the month!"

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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