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 26 settembre 2012

Market Comment - September 26

(Marco Bonelli) Improvement in data (in the U.S.) versus realization that there has never been any improvement in data (in Europe)!

Once again, Europe overshadows everything and protest and riots are one of the strongest reminders that things are not right, which might be a rude wake-up call for all those who believed that shallow talk and mediocre patch-up solutions don't do anything to improve the economy which shows deteriorating fundamental trends in all Europe since Q4 last year. The artificial "good news" will come when Spain gets forced to apply for a bail-out because then the ECB will work its wonders and buy the country, which unfortunately will not do anything to improve economic activity either (but that doesn't matter as long as unlimited QE is in place).

At the same time, some of the latest economic data show small improvements, regional Manufacturing Fed indexes stabilized after sliding for four or five months and consumer confidence rebounded again, almost matching the highs from February this and last year. Better consumer confidence usually gets translated into higher consumer spending, a trend which already shows and a better back-to-school season and optimistic expectations for the holiday season underline that.

As worrisome as developments in Spain and Greece are and as much as they point out how messy the situation is and will become, it shouldn't come as a surprise to any global investor. Europe has been a drag on global economic growth for almost two years and probably will continue to have a negative effect on global growth for a while.

This compares to the slow-growth U.S. economy that shows fractured signs of improvement and a Fed that actually buys assets aggressively (compared to the ECB's intention, that they might buy assets if...) and you wonder if yesterday's sell-off was really due to deep worries about Europe or if Europe was simply the famous excuse to take some profits and trigger some sell-programs after the SPX broke through the well-discussed 1450 level, which was also the low of the consolidation range since the QE3-announcement rally lifted the index to new multi-year highs.

The worst day of the month (huhhh!), the break below 1450 in the SPX and 2832 in the NDX (the corresponding low end of a consolidation range, but also the even more important 2830 level), defensive sectors (healthcare, utilities, telecommunication) as the best performing sectors the second consecutive day and the weakest daily adv./decl. ratio since the end of July almost certainly lead to a confirmation of the current nervous, skeptical and negative sentiment!

The more important levels to watch are the highs from March / April; as long as the major averages trade above these levels, all action could be declared as short-term, positive consolidation that confirm the break out to new highs: 13338.66 in the Dow Jones, 1426.68 in the SPX, 3134.17 in the Nasdaq Composite, 2794 in the NDX, 1008.68 in the S&P400 Mid-Cap and 847.92 or the all-time highs at 855 in the Russell 2000.

Sell-offs like the one yesterday could easily turn out to be short-term buying opportunities as too much seems to be read into the short-term action of the SPX, the Euro, crude-oil and commodities in general. More importantly, cautious sentiment and consensus expectations for a short-term pull-back only get enforced, which opens the door for a contrarian rally once market participants realize that the U.S. economy appears to do better than the rest of the world and Q3 earnings turn out to be "better than feared"!

Many sectors in the technology (semiconductors, networking, storage), capital goods and energy sector (oil service, E&P, multinationals) have room to move higher; the financial sector also has plenty of upside potential before it reaches the upper end of the broad 3 ½ years trading range and consumer and retail stocks are trading close all-time highs anyway! After a brief pull-back during the last seven trading session, traders could play these sectors for a 5 to 10% move to the upside over 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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