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 18 maggio 2012

Market Comment - May 18

(Marco Bonelli ) WMT versus CAT - a symbol for consumer versus industrial activity as part of the economic recovery?

WMT up $ 2.49 after a favorable Q1 earnings reports, CAT down $4.06 after its monthly dealer survey showed global order growth decelerating the second consecutive month, this development may provide a deeper look into the economy than it appear on first look. Industrials (about 15% of the US economy) led the recovery and pulled the US economy out of the Great Recession during the past three years.

But the group already showed signs of slowing in the past two quarters while the housing and consumer displayed signs of life. The widely expected acceleration of the economic recovery in the second half of this year is dependent on a strengthening of consumer activity, which by the way rose to almost 70% of total GDP - however, a recovery of the consumer still faces many head-winds!

In addition, a quintuple whammy gave investors a hint of how fundamental reality looks like yesterday. All economic indicators including the mentioned CAT Dealer Survey disappointed that left better data like April Housing starts or the Empire Manufacturing Index from earlier this week more look like exceptions to the trend than proof that the economic recovery is gaining steam.

In the meantime, with chart-pictures further darkening, more and more major indexes breaking through crucial support levels and investors paralyzed by one of the worst month-to-date performances in May (from -5.84%, -6.66% for the Dow Jones and SPX, - 7.6% for the Nasdaq Composite, S&P 400 Midcap and Russell 2000 to -8.46% for the Value Line Index - not counting the double-digit losses of some sector indexes), a few "buying-the-dips" calls and comments emerge, which are also helped by further growing cautious to bearish sentiment (AAII - small investor bullish sentiment reached an almost 2-year low at 23.6% but opposite to the broad believe that retail investors' behavior is a big contrarian indicator, bullish sentiment reached a high of 45.6% in the week of March 16, when the SPX just broke above 1400 - not bad!).

Although recommendations to buy the dip will likely lead to the desperately awaited rebound at one point, the question is how lasting it will be as long as economic data continue to disappoint, as long as earnings estimates for Q2 and Q3 get revised to the downside and as long as global uncertainties (including the situation in Europe) persist. With little guidelines and no real catalysts left, let's conclude with another look at the Value Line Index, that not only gave clear sell signals beginning of August last year but already gave the first sell-signal on April 9 when it broke out of a rising wedge formation to the downside but also again on May 9, when it closed below the neck-line of a head-and-shoulder formation. The calculated downside was 7.14% of which 4.86% are already behind us with another 2.4% to go from current levels. The VGY Index is also the first major index that broke its 200day MA.

So as much excitement built around the FB IPO and as much traders might have hoped that the trading in FB may lift the whole market higher, the afternoon might turn out to be another disappointing trading session on back of a very weak day yesterday, chart levels broken and ahead of another uncertain weekend with a wine & dine G8 Meeting and whoever knows what happens in Europe.

In this context, the rebound in gold and silver makes a lot of sense and could turn out to be a longer lasting move as precious metals finally do what they are supposed to do in times of uncertainty!

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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