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

mercoledì 13 giugno 2012

Market Comment - June 13

(Marco Bonelli) Sometimes, easy explanations lack a little bit of substance...

...so when Alexis Tsipras, one of the most popular political figures in Greece these days, who intends to renegotiate the bail-out/ rescue package from end of last year and opposes austerity measures says, that "the crisis is European", that it's in "nobody's interest for the Euro area to break up" and calls "keeping the banking system stable" the "national priority", the European crisis is definitely resolved and the market (Dow Jones) jumps 80 point...


...and when Chicago Fed's President Charles L. Evans, a non-voting FOMC member and one of the most dovish Fed officials reiterates his call for more accommodation the 19th time, it is clear that the Fed will definitely initiate QE3 at its FOMC meeting next week and the market jumps another 80 points...

Let's just call it an expiration driven short-covering rally that was probably relatively easy to pull through as market players are as concerned selling into the strength (hoping that any kind of rally will improve the year-to-date performance of their books) as they are buying into weakness (worried that any kind of sell-off could last longer, adding to the mediocre year-to-date performance so far).
Despite the relatively strong performance, the major indexes are basically dancing around the closing levels from last Wednesday (after the market showed the strongest gains of the year), reversing the reversal from Monday that reversed the reversal from Friday.

Fortunately and finally the market got a dose from the macro-economic front and investors get distracted from watching 200day moving averages (as we speak, the S&P 400 Mid-cap and Russell 2000 index drop again below their 200day MA, while the Value Line Index crossed that line on May 17 and -with one exception- trades below it since then) or other critical chart levels (i.e. highs from 2007 or 5-year downtrends, which runs at 1306 for the SPX!):

April and May Retail Sales were reported (unsurprisingly) weak, which sends a not so pleasant reminder that US economic growth sharply weakened in the past months. In this context I would like to point out that it's the trend of various fundamentals that's concerning and not the actual levels. Most discussions cover the current level of GDP growth, consumer spending, export orders, earnings etc. and come up with the conclusions that although we are not really in a strong-growth environment, it's not bad either, disregarding that the growth rate of a lot of measures of economic activity, including earnings started deteriorating from the "peaks" in Q4 - a rather concerning development.

As much as certain levels get discussed to evaluate fundamental health, a lot of market participants blame certain situations like the one in Spain or Greece or the weather to explain current weaknesses, also pushing the broader development over the last few months aside. With that it's easy to pick a positive comment from a politician or other official that addresses these specific situations and supposedly may solve it. Hoping for a favorable outcome of the Greek election (whatever is defined as favorable) or hoping for an announcement of a combination of QE and Operation Twist at the FOMC meeting next week are easy to embrace and sell. You add some more or less important chart levels and option expiration and a few market players even like the idea of buying any dips...

The rest of the week will still probably show a mix of erratic moves, short-lived trends, intraday reversals and other inexplicable action, all in preparation of next week's events that have the potential to bear more substance and define the direction for the next few weeks.

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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