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 22 maggio 2012

Market Comment - May 22

(Marco Bonelli) What was the headline of the day?

"JPM suspends daily stock repurchase program" - the very program that was announced two months ago along with the individual stress-test results, before the Fed officially announced the same results!

The next question could be: Is the market overbought?


This is not really an attempt to forcefully run against all analysis and the first buy recommendations citing the most oversold market conditions in months and years, it's a clear reference to the extreme positive levels in the advance-decline ratio for the NYSE and Nasdaq that usually gets corrected to a neutral level within a day or two. So it's depends on the perspective but very short-term speaking the market might even be overbought.

Psychology is usually a big factor after a strong technical rebound following a few weeks of negative returns. All of a sudden, everything looks great; positive news headlines get highlighted that support the market's reversal; smart comments get published that the recent decline was "unwarranted" and "overdone" and although market watchers are slightly afraid to be the first one to ring the starting bell of a new rally, they are more afraid of missing the move, so they eagerly line up and reiterate their bullish call.
Investors are usually more cautious after one strong day and the questions on many minds are if the correction resumes and if more declines are coming. That perception softens when the market either moves further or at least holds the closing levels of the rebound and after that the fear of missing out on a possible rally usually dominates the concerns that initially dominated.

Having mentioned the broad-based rally, the question is also how broad the rally really was. AAPL's 5.8% move obviously contributed big to the performance of the technology sector, the Nasdaq and the SPX. Financials underperformed over the course of the session and the S&P Diversified Financial Index remained 22.5% below its top from end of March without joining the rebound at all. Finally two of the four top performing sectors were energy and basic materials that reacted to some stabilization in commodity prices. Bottom-line the broad-based rally was not that impressive when you look at the details.

Nevertheless, let's not micro-analyze the rebound, as it was a solid technical reaction! On Friday, the Dow Jones, SPX and Nasdaq Composite stopped short 1.1% off their 200day MA and the NDX about 2.0%, all levels, which are critical technical supports. As the Russell 2000, Dow Jones Transportation and Value Line Index already broke below the related marks and the former two broke back above their 200day MA yesterday, while the SPX climbed above the psychological 1300 mark, the levels from where the market started its rebound were fair. In addition, the Value Line Index was also just short about 1.5% off the calculated downside resulting from the head-and-shoulder formation that developed between February and beginning of May.

Looking ahead, the technology sector gets tested tonight (DELL and ADI reporting) and tomorrow (HPQ reporting), the macro-economic camp gets tested on Thursday with Durable Goods Orders while the housing sector fans get a fresh dose of data later today and tomorrow. It would be surprising if any of these data provides information that sharply contradicts the recent deteriorating market and fundamental trends, for that reason, selling the strength and further lightening up positions might prove to be a successful strategy!


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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