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

lunedì 16 luglio 2012

Market Comment - July 16

(Marco Bonelli) Is there another expression for "fooling yourself"?

§  On Friday, the market broke a 6-day losing streak!

§  Have we seen a short-term bottom or is it just a bounce from oversold conditions?

§  The negatives have become accepted and obvious and are probably already prices in to a certain degree!

§  It looks like Q2 earnings come in not as bad as expected and Q2 might be the bottom of the earnings slowdown!

§  Q2 earnings from JPM, WFC and C were solid!

§  China's GDP and latest industrial production and retail sales were not as bad as feared!

While the market showed negative performance for six days prior to Friday's short-covering rally, the expression "losing streak" is highly exaggerated as the Dow Jones, SPX, Nasdaq Composite and Russell 2000 merely lost 2.86%, 2.86%, 3.69% and 3.52%, respectively during that time. This development didn't change anything in the overbought (!) condition of the market that still lasted from the rally in June. So talking about a short-term bottom and interpreting the higher lows / higher highs pattern from the lows beginning of June as a positive development may turn out to be a dangerous call and conclusion. Bottom-line, Friday's headlines received a positive spin and several short-term chart levels like 100day MAs and the moving average of the Bollinger Bands were played.

For earnings, it's way too early to draw any conclusions from financially engineered earnings in the banking sector (does anybody talk about continued declining revenue growth?). The next three weeks will give investors a better idea how good, bad or not as bad as feared Q2 earnings were and how good or bad Q3 earnings will be. The majority of market participants continue to embrace the traditional assessment pattern of earnings surprises on back of earnings estimates that have been reduced too much. It also appears that - similar to last quarter -  lower earnings guidance gets mostly ignored in light of hopes for an economic and with that, earnings recovery later this year and in 2013. Given a global economic slow-down in full swing and major headwinds from a (close-to) recession environment in Europe and higher Dollar, this perception may also turn out to be a dangerous move.

Next to the first real week of Q2 earnings releases, Ben Bernanke's semi-annual report to Senate and the House on the economy tomorrow and Wednesday and the Fed's Beige Book on Wednesday may be the most important events this week as any kind of Fed-related event used to be the primary reason for market moves in the last 6 to 9 months. Any indication and hope for a QE3 announcement at the upcoming FOMC meeting and the market could even make an attempt to revisit the highs from March/April; lack of any imminent stimulus action in combination with mediocre Q2 earnings and a weak outlook for the rest of the year and many market players will quickly find out that they fooled themselves by believing what they believed in on Friday!

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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