Into the trading week, (June 4- )

Increasingly disappointing news over May carried into June with a bang as the NFP# fell below 100K. The last remaining positive was literally a game changer in many minds with markets falling to the largest daily loss in 2012.  As discussed into last Thursday’s trade, it will be all on U.S eco’ data….The next few days, U.S markets will focus on its saving grace (employment…housing).  The ADP (105k+), Initial claims (370k)on Thursday and NFP# (150k)need to come at consensus. If these numbers falter, the market will have nothing to hang its coat on”.  The entire market narrative has changed as ‘slower growth’ has eclipsed the turmoil in Europe over the past 2 trading days.

 

The only hope for Europe has been ‘policy intervention’, now the hope is coming back to U.S and it’s markets.  Unfortunately as realized in Europe there is no easy fix as in the past few years. In Europe, ECB doesn’t want to tip it’s hand before Greek elections and the idea of the FED taking very aggressive action this early isn’t a reality as eco situation likely not soft enough to justify such.  Any other FED action is likely seen by markets as having little effect (ie. more twists).  This won’t be a market, it will be a debate show now as to what and who will or won’t do.

 

If May wasn’t demoralizing enough, this start to June will surely do the trick near term. Due to this, any ‘longs’ not selling in May and/or climb back into SP 1340 as noted recently, will likely begin reduce exposure now allowing for market to go even lower.  Any investors with going ‘long’ expectations before eco’ data hit will fall back further into the bleachers.

Ahead of the open, (05-06)

 Market drove through another round of support at SP 1275-1270 to a low of 1266 mid-day, but what was getting all the attention was the afternoon rally back to even on the day that garnered all the hoopla!.  Question here is what is so great about a 10 handle snapback?.  Despite a quiet and decent European session to boost U.S markets, U.S selling still continued in the morning.  All that happened in the afternoon was the selling petered out for time being and a little squeeze ensued after a big slide on Friday.  In this view, that’s typical due to oversold conditions with all seemingly trying to find a bottom today off the SPY for a near term big squeeze.  Frankly with no market driver (policy intervention) any squeeze (20-30 handles from 1266) will be short lived, so why not wait to step up and buy if you’re investor. (The macro clouds gathering last week didn’t go away over the weekend).  If you’re a fast trader an oppy’ might arise in the next few days with many meetings and/or events (G7 emergency call Tuesday, ECB Wednesday, Bernanke speak June 7) going on, but at the end, we will be back to square one as nothing substantial will occur and more disappointment will likely ensue as these turn out to be non -events.  Don’t see leaders spilling the beans with hints on possible market interventions, just to please the markets at this stage.  This is likely many market participants wish ‘play’ now, a squeeze from oversold conditions off intervention speculation.  In all, actions are louder than words (global publications headlines) is the preferred trade here.

 

Also, market has no eco’ data/ corporate events on the calendar this week worthy of being a driver.

 

As noted yesterday on the topic of market going lower, today’s SP 1266 low is not low enough. Some sort of capitulation is need as this market besides its 10% correction hasn’t seen much panic (maybe a little last Friday).  First realistic step is to SP 1250 without intervention occurring.

Ahead of the open, (06-06)

Although major indices (DJIA,NASD) seemed stagnant throughout the day, the underlying tape showed squeeze promise as an allocation switch into higher beta (RUT outperformed) was evident.  Many stocks off the Shadowlist confirmed such a move (ie IPGP, LVS, GWRE, SODA, MCP >5-7% gains).  Naturally, if playing a squeeze/bounce trade, you go after the most beaten down areas of the market (also fins’/banks today) and not the big caps.  Big cap loved techs did nothing today.(ie AAPL,IBM.)

 

The G7 turned into a non-event, but it was offset by more ‘policy intervention’ headlines ahead of ECB, Fed speak Yellen/Bernanke (dovish?) in the next few days and a few proposals of assistance to Spain the sovereign (not its banks directly).  Also, a step towards European ‘bank union’ was making the rounds.  In all, the “..wish ‘play’ now, a squeeze from oversold conditions off intervention speculation”, was winning out as the SP pushed 5 handles higher. (You know (cough, cough), if all these dreams come to fruition the market might be at SP 1400 this week, not just 1300.)

 

Now the actions to the speculation begin.  The morning will be interesting to see market reaction to ECB decisions and/or framework for later ( if any), in both directions.  Expectations are growing on all fronts setting up for disappointments. The view expressed recently here is the ECB doesn’t want to do anything material before elections so not to take pressure off politicians and the FED is unlikely to sound to dovish to drive stimuli hopes as it's not justified yet.(Bullard didn’t today).

 

Added to WPRT to list off CAT alliance, ULTA, GWRE off list put in good reports, but EPS trades are not in vogue this Q as growth stocks have been undergoing  ‘re-valuations’.

Ahead of the open, (06-07)

All week the potential of big squeeze (up to 30 handles from 1266SP) was speculated, today revealed that you never know how far one may go as 30 handles were added just today!.  The main drivers today were the same ones market reacted tentatively to yesterday, mainly the speculation of… a few proposals of assistance to Spain the sovereign.  The importance of these ESM proposals with Spain is they are TARP like bank recaps.  The story today was a compromise to bypass Spain’s balance sheet.  Whatever the terms of this bailout (directly or indirectly to banks), all we need to know is its TARP.  Also a notable item was …a step towards European ‘bank union’ was making the rounds.  A dovish WSJ story was also timely and the “..wish ‘play’ now, a squeeze from oversold conditions off intervention speculation”,... was off and running.

  

The move was nice to see, but it was a lot of ES/ETF’s action as fast traders took over. This was discussed early in the week,..” If you’re a fast trader an oppy’ might arise in the next few days with many meetings and/or events ..”.  Now we need to see better breadth, volume and hold SP 1300 by Friday’s close to possibly change the recent short term picture.  Bernanke on the hill at 10am, Yellen strengthened the case for FED action.

Ahead of the open, (08-06)

Considering the market squeezed on ‘hope’ this week, it’s not a surprise the peak of the move occurred just a few minutes before the last main ‘ hope ’event of the week. (Bernanke’s much awaited testimony). Of course, the hope was for more hints of QE, but the speech was less dovish than market had expected.  In the last 72hrs, the tone through WSJ story and Yellen had become more dovish, so market seemed to have wanted more remarks on the prospects of monetary policy.  Unfortunately this is not Ben’s way to do things.

 

But, is that the sole reason for the selling in the last hour?.  Was the market that disappointed?.  Probably not, the rollover from SP 1325 was likely due to the magnitude of this week’s rip and just pure tiredness setting in.   Other than the last hour of trading, the day exhibited customary signs of digestion.  End of day may have been realization this weeks ‘hopes’ calendar concluded and now it’s time to get back to some reality and cold hard facts.   Greek elections have played second fiddle this week (no polls noise till election), but are now just over a week away and considering the markets tumble after last election, it will begin to matter next week.   Also, a look at Gold today signals hope for any major policy action on FOMC June 20 was abating.  Although the market initially rallied off China’s surprise rate cut, the realization later is the cut may have been due to this weekends eco’ data signalling some ‘hard landing’ facts.

  

On the corporate single stock side,  LULU  guided down signalling what other high beta retailers like FOSL, VRA have done since March. These names have shown high multiples were out of whack as now growth appears to have stalled on a dime.   

WPRT  added this week to list, peaked at 15% intraday gains.

Into the trading week, (June 11- )

 

The ‘hope’ rally that built in large part to speculation of Spainish acceptance of a bailout from EFSF came to fruition this weekend. The funds will come from the EFSF and be lent to Spain through the FROB (Fund for Orderly Bank Restructuring), which will channel them to Spanish financial institutions.  This was noted early last week, “..a few proposals of assistance to Spain the sovereign (not its banks directly).  The ES markets rallied at the open of ES markets (high as ~1340), but the true test will be to see if 1335 resistance can be taken out(hold) by the cash market end of day.   Again, this is the area noted last time as a place profits might be cashed in.  The chances are this event will not be a game changer in the big ‘European’ picture and fading will eventually occur as most of the positives were likely built in last week. New concerns will likely emerge and Spanish yields will be in focus as will Greek elections. The Spanish bailout will likely strengthen the hand of the anti- bailout Greek parties

 

The other big news was the China eco’ data coming in better than expected.  Recall, some fear was present following rate hike and so this is somewhat of a ‘growth’ relief. Imports/ Exports were a pleasant surprise.

 

In all, beginning of week should tell if this has the possibility to be a sustained rally.

Ahead of the open, (12-06)

What caused the ES to do a 40 handle plunge after the initial favorable response to the Spanish bailout acceptance?

 

“The chances are this event will not be a game changer in the big ‘European’ picture and fading will eventually occur as most of the positives were likely built in last week..”

  

“ …New concerns will likely emerge and Spanish yields will be in focus as will Greek elections. The Spanish bailout will likely strengthen the hand of the anti- bailout Greek parties..” 

  

Sure enough, the caution/ details/implications listed here into the trading day were the same ones market caught on to as the day progressed.  The Spanish yields were the clue to the markets collapse. Instead of keeping lows, they accelerated dramatically to close at 6.5% showcasing confidence fell not rose on Spain’s acceptance (peripheral Italy followed as is usually the case as worries mount of who will be next).   Simply, markets took their cue from the sov’ bonds action.  Also not helping was the fact the assistance was not directly to Spain banks, but through FROB (really the sovereign) with little in the way of conditions attached. In all, Spain’s debt will rise by ~100bln.  The hope was this wouldn’t happen as some rumors (skip balance sheet) had it last week. (reason for big rally >2% day last week), “The story today was a compromise to bypass Spain’s balance sheet”)..last week.  As far as the Greek angle noted, the potential boost to the Syriza party was gaining traction as the day wore on.

  

Although the weekend rip higher and surrender was driven mostly by ES/ ETF, single stocks eventually got caught up in the downdraft. Most stocks/ETF’s put in outside reversal days on the charts due to the big range days, ie financials came off 5-7% from highs.

 

The technical resistance noted at 1335 held ground and now market finds itself at a support level ~1309-1300. Marginally closed under 20MA and below 1309 (down trendline).  Market should remain in this band as it becomes more tentaive before Greek elections and the busy calendar week ahead.

Ahead of the open, (13-06)

f there’s any consolation to a 40 handle ES drop in a single day, it’s that a bounce oppy’ is on traders’ minds. Unfortunately for investors, today was just that, an opportunity for fast traders not investors.  Still, market did recover back to last Friday’s close and remains in the range band noted yesterday.

 

Today, we were back to the usual ES/ETF dominated trade of late.   Ahead of the open, noted SP prices closed marginally under 20MA and 1309 down-trendline. Although Spain yields hit record highs at ~6.80%, market prices didn’t get much lower (SP1307).  Considering no technical damage was done and selling didn’t pick up with fresh spike in Spanish yields, fast traders jumped in for a bounce trade as market seemed to turn a blind eye to Spain’s rising borrowing costs.

 

Note there wasn’t any new positive twist to yesterday’s negatives, just an over- reaction to ECB’s bi-annual report and the push for a ‘banking union’/deposit guarantee. This report supports what the market wants and what is often speculated, so it’s really nothing new.  All in, seems these dead cats keep bouncing, just happens the big cat JPM’ ’Dimon testifies tomorrow.  Maybe a little reprieve from Europe, yet a meaningless exercise at best.

Ahead of the open, (14-06)

Equity market meandered all morning as Dimons’ testimony took precedent over Europe (which was quiet overnight). Even a big disappointment in the Retail sales with sizable revisions downward to prior #'s couldn’t get traders off CNBC’s coverage.   Unfortunately in a market dictated by headlines, it was just a matter of time before something hit the wires and swings the market intraday.  As afternoon trade rolled in (2pm) numerous bits hit.  None were game changers in this view, but the tape became better for sale and rolled over into the close anyway. Some headlines like warnings of a failed Spanish bank, Greek deposit outflows rising have been around for days, while Greenspan’s comments really don’t matter in 2012.  If anything, it was realization the Greek elections are nearing and some risk off began.  So far this week, markets have not expressed too much concern over the upcoming Gr. elections.  Also, U.S markets are not reflecting the destruction in European sov' bond markets .  The risk these countries (ie.Spain) may be cut-off from the private debt markets should be a concern with yields so high.  As far as Greece, the hope is even if the anti- bailout Syriza wins, a compromise with better softer terms will be given out.  Spain’s condition light bailout is the driving force behind this idea of Europe softening on demands.  Be careful what you(Syriza) ask for with only 1 month of cash left for your country. You may want to stay in the Euro, but it’s not you who will eventually decide.

As the market’s  giveth and taketh away month continues with yesterday’s bounce evaporating, an interesting row of tall soldiers stacked together is showing up the majors charts (ie. SP) and will likely build for rest of the week.  This sets up a potentially sizable move once the top or bottom gets busted.

Ahead of the open, (15-06)

After all the recent market up and down daily chop, it really isn’t a surprise today was ‘up's’ turn to go as yesterday was ' downs' turn!.  Of course this comes with usual afternoon rumors and speculation to swing the market.  But there was one significant ‘fact’ that didn’t set up the initial burst of >10 SP handles in seconds and plunge back down and rise again.   It was the BOE cold hard facts of a 100B lending program with hints of QE as the case for monetary easing was building to do something in July.  Someone (country) has to go first and many times its UK leading the charge of policy action.

In the morning, Greek optimism picked up for ND party b/c there are now supposed ‘ secret’ polls all of a sudden and the online bookies have ND ahead.  Yep, that’s what it’s come down to!.  (Everyone now in agreement now whoever wins will get terms softened, but ND will be easier to deal with).   Anyway on to the afternoon shenanigans and the Reuters story of how Central Bankers are ready to take steps to stabilize markets should the dam break after elections….. (Oh really, thank god!..(big sarcasm there).  Yes, this expected and obvious step saw the computers falling over each other chasing this co-ordinated G20 readiness for over 10pts in seconds.  The ES/ETF trade talked up endlessly lately was so clear here today.  Single stocks did absolutely nothing.

All in, the market expectations have blossomed over Europe on all angles late in the week.  The problem with that is it sets for disappointments and we all know Europe has a way of coming through on that front.

Into the trading week, (June 18- )

Another weekend, another immediate major European crisis averted with a ND pro- bailout victory.   You could say market knows politics best as it started to price in the event late last week.  Unfortunately it can’t erase the market damage started by all this in early May.  A coalition gov’t still must be formed quickly to avoid a repeat.

What’s next?  Well, a lot as far as potential catalysts go after this seemingly anti climatic Greek event!

FOMC meeting 20/06.  This is a 3 part event with statement, forecast update and Bernanke’s press conference.  At this point it’s not clear to anyone what will be done (twist extension possibly). What might be said in the press conference is likely to be the key as expectations are for further easing hints.

Eco’ data on 21/06 with flash Global PMI’s will be first indication of what is happening in the month of June. 

Market will likely be happy with any signs of stabilization after May disappointing #’s.

The market also gets back to some corporate news with some notable earnings for May end reporting companies.  It kicks off Tuesday with FDX, followed by the likes of ADBE, RHT, ORCL for tech later in the week.

In all, lots to possibly drive market through SP 1340 resistance levels.

Ahead of the open, (19-06)

If there’s any question relating to the Greek election becoming anti- climatic, one just needs to see the low volume today on the market.   As Greece returns to some normalcy, US markets traded mixed in anticipation of FOMC day on Wednesday.  As far as equity market not selling off on Spain yields over the 7% critical level is a sign the bar has been set for European intervention. 

  

Last week, UK led the charge and the market expects all to follow suit.  Since the UK policy moves/hints noted here last week, the market has tentatively broken ~1340…” an interesting row of tall soldiers crammed together is showing up the majors charts (SP) and will likely build for rest of the week.  This sets up a potentially sizable move once the top or bottom gets busted..” .    The move might be tentative looking now, but with so many catalysts on deck it won’t take much to have a true follow through day.

  

A lot has been priced in with the bar set pretty high now, but full blown QE has not.  A few firms out today speculating on a ‘Jackson Hole’ moment.  Pretty gutsy, hopefully market doesn't rally into that speculation or it sets itself up for a big disappointment.

Ahead of the open, (20-06)

The breakout out of the “tall soldiers crammed together” continued for a 4^th consecutive day with what could go down as a follow through day.  The SP at its peak today had added ~30 handles since the above formation was busted late last week with the catalyst today being anticipation of the FOMC meeting. (Decision comes 12:30pmET, 2pm forecasts, 2:15pm press conference).

 

As noted yesterday, “hopefully market doesn’t rally into that (outright QE) speculation or it sets itself up for a big disappointment”.     Now that a rally day occurred, hopefully the market can handle a FOMC disappointment because of the right things going on in Europe ahead of the June 28-29 EU Leaders Summit.  Gold gave no clue to outright QE coming.  Simply, the hope is this move is not strictly due to the FOMC hype, but anticipation of better things ahead for Europe(banking union to start).  If that’s the case any pullback should be looked at as consolidation.  It is doubtful shorts would press hard ahead of European summit, so dips should be looked at as buying opportunities ahead of the summit.

Ahead of the open, (21-06)

The winning streak might have been halted, but the market acted just right showing the streak was not about QE outright speculation as many had thought.   Instead, it’s mostly about Europe and the progress being made towards EU summit as noted coming into the day.  Even the small pullbacks were bought up as shorts do not want to use their ammunition due to the upside risks coming out of Europe next week.  (An extension of Operation twist for another 6 months and indication that more asset purchases would be considered if warranted by data was all the market received). Forget about the wildly speculative outright QE not happening, the actions were even less dovish than the reasonable expectations, yet market had a ho-hum attitude.  Maybe that will change some overnight after over analysis,  but if any selling does occur, it should viewed as a buying oppy as concluded heading into the trading day.

 

In all, day turned out to be about consolidation as subdued action followed the recent winning streak.  Couldn't ask for anything better.

 

Flash PMI’s will likely be a non- event as there is little chance of a surprise pick- up.  Market only wants to see stabilization signs at this point.  A Finance ministers meeting in Europe is also on deck Thursday will likely drive intraday swings off breaking headlines, but the important meeting is still the 28-29 summit for investors.

Ahead of the open, (22-06)

What appeared to be healthy digestion/ consolidation morning of the rally from 1266 quickly turned into a sell off as any supports were easily sliced through by lunch hour. Discussed recently how markets R/S lines have had little effect.

 

What were the culprits?.  Well, you have to look at the fact economy related stocks/ sectors, high beta selling was strong to understand.  The market did a roundabout this morning as attention has turned to the economy and away from Europe drawing up a roadmap into month’s end summit.

   

Although most Global flash PMI’s showed some signs of stabilization, powerhouse Germany was worrisome.  Also, U.S flash came in at ~52-53 softer than expected/declining m/m and an ugly Phily Fed followed.  The usual trade of bad data is good reversed today. (bad data being good for QE button to be pushed).

 

Importantly, although the FOMC was being called ‘dovish’ by the likes of WSJ and Economist journalists this morning, the action in a softer Gold and stronger USD signalled the call here that the FOMC was ‘less dovish”.. “Forget about the wildly speculative outright QE not happening, the actions were even less dovish than the reasonable expectations, yet market had a ho-hum attitude. Maybe that will change some overnight, but if any selling does occur, it should viewed as a buying oppy as concluded heading into the trading day.”.

   

Question is it a buying oppy’ ...(thus releasing this during trading hours).

Considering the quick market change in focus, it may have to wait as market doesn’t think FED will come to the aid of the stock market fast enough due its hawkish tone (as per Gold/USD today).  Bad data is bad data today.

  

Also entering the week, noted corporate earnings will be back in focus. Well, this has been pretty disappointing adding to the ‘economy’ focus market turned to today.  Outlooks have not been great from techs like RHT.  Also, many media reports out of companies cutting back due to demand lagging.  BBBY results didn’t help the retail/consumer side.