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 21 settembre 2012

Market Comment - September 21

(Marco Bonelli) Surprise, surprise...

Although many market participants certainly knew all the way, the extent of the summer rally from the lows in June probably came as a big surprise to many investors (otherwise it wouldn't have been called the "most hated" rally in a long time). So now, with all possible stimulus measures announced and year-to-date performances for the SPX and NDX of 16.1% and 25.6%, respectively, consensus expectation already formed that "it wouldn't be surprising" to see a pullback in the market, "especially after the big run of the past two weeks". The real surprise, however, would be if the market just keeps on moving!

Sentiment may work as a market driver because investors started perceiving the macro-economic environment and all fundamentals as "stable" as QE3 will offset any negative data and developments (right?!). So it's unlikely that the rule "bad news is good news" (that existed in anticipation of an even bigger monetary stimulus) immediately switched to the original meaning ("bad news is bad news")! At this stage negative news gets mostly ignored because "we know this already" and it's no longer a surprise while positive news does get registered and better than expected economic data is a surprise to many investors who accepted the current slow-growth grid-lock that already pushed out an expected recovery many times.

In this context, the September Philadelphia Fed Index at -1.9 was really a positive surprise! Not only was the reading better than expected, it's also been the first time in five month that this index didn't disappoint (for five consecutive months since April, the index missed expectations, many times by a big margin). The fact that most of the "surprise" came from a much more optimistic business activity outlook and is solely based on hope, which raises some questions but the market usually doesn't go into detail with these sentiment-based indexes - as long as the top line numbers beats, it gets treated as good news!

Not all developments are certainly good and peachy:
The Dow Jones Transportation Index received some major beating yesterday as a major profit warnings from NSC followed up to the major profit warnings from FDX the other day. While this index is often seen as a mirror for the economy and a pre-cursor for the market, the close correlation with the general market has been pretty much broken since the end of January this year, when it almost reached the highs from June last year but pulled back and even was the first major index that broke the uptrend from the September lows. Since then it trades in a wide 5400-4900 range, slightly drifting and mostly below all moving averages, currently below 5000 - once again. During the same time, the SPX and Nasdaq moved on to new multi-year highs! So for the moment it's definitely worth watching but doesn't pose as a warning flag for the overall market (yet).

Another (so far small) concern is the weak market breadth as the improvement in the daily advance/decline ratio already stalled middle to end of July and only saw neutral to average positive readings on up-days. At the same time, the few down-days the market saw in the past two months also didn't show excessive negative readings; therefore, it's definitely worth watching but it doesn't pose as a warning flag for the market (yet).

With that, ORCL and TIBX earnings get the (not surprising!) "could have been worse" / "not as bad as feared" stamp and market players should see the flat performance this week as a (surprisingly) positive consolidation after two weeks of major gains in the market. Happy expiration day!

Trade well and enjoy your late-summer 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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