Ahead of the open, (15-11)

If the market is to rally in the last 5-6 weeks from Thanksgiving as it has consistently over decades, the volume and underlying ‘beta’ stocks/ financials better improve. Today’s vol’ was near the bottom levels for 2011, ES drifted from 1270 overnight to ~1240 as European ‘stabilizing’ developments from Thurs./Friday came in as expected. As far as eyes on 10yr yields, today it was Spain, late in the week it was France, tomorrow, who’s it going to be as there is still ‘no net’(ECB/EFSF/IMF). On Tuesday, European GDP comes out and signs of a sharp slowdown will be evident.

In all, with no important eco’ data/earnings or major developments, you can’t make much of today’s broad action as the market remains in the conviction- less range between 1220-1230 to 1275. Bigger earning potential drivers in tech are ahead this week and will give some idea if CSCO is a company specific positive so far for Oct end companies. Also, retailers will be in focus.

Still, getting a lot of attention today was the Financials underperforming the SP decline by another 100bps. This was across the board from banks to brokers to asset managers. BKX now off 4% in November. Also, 'Momo' growth names had a decent start, but many finshed well off their highs printing not so pretty day candles on charts. (ie.AMZN PCLN WYNN). All in, underlying market giving off same signs discussed recently.

Ahead of the open, (16-11)

On the back of more solid U.S eco’ data showing a resilient consumer, U.S markets started to catch a bid as Euro markets closed 11:30 (same intraday pattern seen for days last week(s). This despite a very bleak day on the Eurozone debt markets:  The culprit for yield rise today was mostly due to weaker than expected Eurozone GDP#’s.

Italian10yr yields, (back >7%), Spain, up to ~6.33% (fresh highs), France was up to 3.68%. Spreads on all non- Germany Eurozone sov. debt vs. bunds much wider.

Why the bid? Is Germany getting off the fence??

A senior economic advisor (a Wisemen) to the German government, said that the time for a political solution to the Eurozone debt crisis has passed and instead the ECB would need to step in and provide stability. 

Also, the broader German Council of Economic Experts (5 Wise' men) last week proposed creating a modified eurobond facility that could go a long way towards resolving the crisis (EU Economics Commissioner Rehn said Tues the eurobond facility deserved attention). Rehn will make a proposal next week incorporating the (Wisemen’s ) recommendations.

* The German ‘tone’ change above may turn out to be a game changer, (if you keep seeing related headlines).

Despite the reversal today, it was really just the opposite of the previous day’s trade as the futures chop continues. For this day, at least the underlying tape performed better.(R2K).

Ahead of the open, (17-11)

A slew of headlines hit around 3pm, the Fitch ‘warning’ against U.S banks being cited as the main culprit for market swoon. It was slightly negative in tone, but nothing that should have spooked the market.

What’s really going on is attention is turning to USD funding stresses. You’ll be hearing about LIBOR spreads next few days with continued uncertainty in Europe. Also, considering it was the EURO that led the U.S market slide, the Fitch so called news is domestic really and shouldn’t have moved the Euro. In all, this (3pm headlines) will all be irrelevant tomorrow as this looked more like a market ‘lulled’ to sleep over past sessions. The volume has been pathetic this week as all seem to be stuck waiting for others to do something about the technical “triangle” consolidation. Yesterday (Tuesday), it looked like the top at SP1264 may go, but it was refused.  So eyes turn to lower end today of 1236.  As this 3pm slide started, it was occurring with no buyers around; a little selling easily gets exaggerated as there are no bids around. I think this was ETF action mostly with single stocks seeing little selling. 

As expectation is for a significant move on a triangle 'break’, selling picked up into close as 1236 neared with another unpredictable ‘overnight’ in Europe ahead. It’s quite logical some wouldn’t want to be around in the morning. A range breakout at SPX ~1236 will be likely be induced by a range breakout on the EURO/USD 1.3406 on the downside.

Here, still looking at 1230 to 1220 as last support before drop below 1200, not 'triangle' all are fixated on.

_______________________________________________________________________________________________

Morning update:

Deleveraging accelerates in Europe following a poor Spanish auction. Spain sold €3.5bn versus a maximum target of €4bn with a soft 1.5 bid-to-cover while the French auction had a slightly better sale. Spanish and French bonds across the curve plunged and yields posted new record highs (Spain: 2-year: +27bp to 5.5%, 5-year:+29bp to 5.9%, 10-year: +31bp to 6.7%; French: 10-year yield spreads +12bp)

RIFT escalating between France/Germany, Merkel ..” the crisis is “not over” and rejects joint euro bonds. She said that the ECB can’t solve the euro’s weakness and said debt crisis requires political solutions. She also ruled out bank recapitalization and the ECB being able to solve the euro’s woes.

Ahead of the open, (18-11)

What ails Eurozone and hopes of Germany or ECB giving in and fixing it faltered pre-market as followed up here pre-market morning update: a) Spanish/ French yields coinciding with Merkel’s comments. “ECB can’t solve..”  Add, fresh USD funding stresses..see ZH note at 1:30pm…Global dollar liquidity freeze  ( noted here coming into the trading day) and the ‘soup’ boiled over at Europe’s close as market participants began to doubt the hope of ECB intervention/ defending and markets slid fast through this week’s low and Greece’s referendum low from prior week.  IF market truly believed in a ‘wildcard’ in form of some QE coming, Euro’ would be down not up and Gold would be up, not down.  Contradiction in what was talked about as far as QE in some form by talking heads/ newspapers this morning (international political/countries pressure ie. Wise’ man noted recently here on ECB) and what underlying market (Euro/Gold) was actually doing was clearly evident.

As pointed out proximity to~1236SP pushed sellers in and left new buyers side-lined by Wednesday’s close .. “..with another unpredictable ‘ overnight’ in Europe ahead”.  While market digested morning news, traders still had a few hours to get out at ~1236 before a break of SP1220. ..”Here, still looking at 1230 to 1220 as last support before drop below 1200”.  In all, intervention may occur by year end, but with buyers on strike, it’s begun to feel this week like dip buying at lower range of wedge 1220-1230 may be exhausted this month until fresh lows are hit.  The consensus view gathering steam of a year- end rally while market consolidated October’s historic in November, dissipated in the morning.  Despite solid eco’ data so far in November, the markets underlying faults have been cited for days here leading to rejection at SP 1275:

Financials underperforming, down >2 >4 and by Wednesday 6% month to date., Growth, higher beta stocks not participating, RUT underperforming for days. Also, since CSCO’s first major Oct end report, which was positive, EPS’ reports since have been coming in weaker than expected. (ie. NTAP AMAT, WMT, BK, DELL disappoints and many others just ok).

Markets may still get a rally, but it will have to start at lower levels. BTW, 5-6 weeks is still ahead for Thanksgiving to year end on a ‘wildcard’.  Now, handily < 20MA benchmark with expectation of next support being hit without wildcard.  Will update view ahead of Friday morning, if anything substantial occurs last hour or overnight.

Into the trading week (Nov.21-)

By mid- week, market had started to believe ECB may actually not intervene or just end up being late to the game. (Merkel, Draghi shooting down ideas). Funding stresses (w/ European banks) also heightened late in the week.  Euro’ not imploding is a sign of no ‘big’ QE on the agenda, but it’s also a ‘funding stress’ result symptom, so hard to gauge.

Overall, investor sentiment starting to breakdown due to continues broken promises ie. Summits haven’t produced anything concrete for months as Europe still doesn’t have a ‘net’ over it.  Last week, we’ve seen buyers spurn bonds and/or bonds being attacked in Europe’s core.

In all, the past week is demonstrating a shift in investor tolerance for anything and everything Europe.

Market backstop remains US eco’ data (initial claims best indicator last week) with GDP back on track for 3% in Q4 after week’s data had firms raising growth forecasts. Employment whispers for Dec 2 starting to come in at 200k~. We also had FED hints of acquiring MBS assets (targeting housing) QE.

As always, try to look forward here, things to look at during holiday shortened week coming up:

It seems there are quite a few possible ‘positive bias’ catalysts to coincide with seasonality for a bounce.  Of course, this depends on no new house-of-cards, Europe revelations.

*FOMC minutes Tuesday, look for noise/stance of Fed on MBS QE

*European commission meeting on Wednesday, recall Wiseman/ Rehn notes from last week, proposal to take place here, maybe get something on Eurobonds from ECB as well.

*PMI’s from China/ Europe (Wednesday am), China should be on watch here closely.

*Avoided noting recently (“Supercommitte” November 23 deadline) due to fact it hasn’t been a major market direction theme, in this view, despite lots of chatter. The outcome is uncertain, expectations are dwindling. It may be a non-event unless 1.2trillion is pushed back, which will likely disappoint.

*SP updating ratings on world’s biggest bank by end of November, so this may fall into next week’s calendar??.

*ADI report for semi sector is important. Not much else is significant as far as reports go, CRM added to list of disappointments post CSCO as bookings slowed considerably. Example (CRM) of why you can’t dive into a stock immediately based on top/bottom line any more. Need to ‘dig’ inside.

Ahead of the open, (22-11)

As pointed out last week, a sea of change in investor tolerance was evident to Europe and its governing bodies/ countries.  Today, the co-chairs of the US congress ( ‘Supercommittee’ ) failure showed inaction is still rampant on this side of  the Atlantic (deadline 23rd, but needed days to ‘score’ any plan after making it public, so threw in towel today ). Although, the consensus view was for the committee to fail and not strike a deal, this was still all the chatter today and many debated that this was responsible for a good portion of the market drop. Of course, at the end, there is some disappointment shown in the US market (it leaves unanswered questions to extending payroll tax/ unemployment benefits for ’12), but it doesn’t explain today’s slaughter across the board in European markets. Simply for this reason, it’s not the ‘expected’ failure in U.S, but a continuation of Europe and the sovereign crisis. Interestingly, today’s beaten down markets weren’t caused by ‘bad’ news as last week from Europe, but a lack of news from Europe, which again proves investor tolerance is fading. At least, no news should have been good news!.

Also, entering into equation and more of a catalyst vs. ‘Supercommittee” was the news out of Asia overnight to help explain the slide, particularly the beatings in higher beta coals WLT, steels X, copper FCX stocks, machinery CAT JOYG, engines CMI, resources were down 6% in Europe. China related stocks incl, WYNN LVS continued to dump.

• Finance in charge said, “ …that the world will head into a long-term recession and that China needed to reform in order to cope..”
• China seeing investors pull money out, monthly outflow of foreign currency was first since Oct’07
• Shanghai home sales down nearly 50% yoy this month
• Japan exports fell sharply indicated softer demand was showing in the global economy.

In all, what’s important short term is the technical picture to come out of today. As ugly as its seemed last 3-4 days, there may be some short term 'holiday' hope. Most expected SP1200 to be support, (cited here a break of 1230-1220 would be last support before drop below 1200).

Considering we got that on a fast drop to a low 1183, nearly ~55pts from ~1236 triangle low in just 3-4 days, the market may find some stabilization SP1183-1185 (50% retrace) and therefore it may be time for …”possible ‘positive bias’ catalysts to coincide with seasonality for a bounce”. Resistance would be in the 1215’ish area.

Ahead of the open (23-11)

A 4th straight down day since noted here, ‘funding stress, poor Spanish auction, rift between Germany/ France, Merkel’ ruling out ECB to solve crisis’. Today, you can say nothing has changed as these same crisis symptoms were echoed…very weak Spanish note, ECB funding demands up big, Merkel disagreeing with everything……

The fact that nothing has emerged from potential catalysts so far this week,(ie. FOMC dashed immediate QE hope today), it’s probably better to be sidelined for the holidays and avoid European drags. What’s the incentive to be around? It’s unlikely a ‘bazooka’ outcome will surface unless a big bank mishap happens first and/or until Dec 8/9, (ECB meet-up, Eurozone leader Summit). A bazooka will not come via a mid-day announcement like IMF’s today, so it’s doubtful you’ll miss anything, except a ‘mishap’

Again, we saw how investor tolerance is fading, a real solution is wanted and not another gap -filler as today’s IMF credit line proved to be by the markets ho-hum attitude to it.

It’s good to see some stabilization at SP1183 since yesterday, but believing now any move into ~1215 will be sold into (unless it comes with something very material to Europe).

Into the trading week, (Nov 28- )

Although, OECD (organization for economic co-operation and Development) says the world must “be prepared to face the worst”, this morning, a Global stock market melt up ~3% is underway because an Italian newspaper reports IMF is preparing a bailout for Italy/Spain. The report says France/ Germany are planning a quick new pact on budget discipline that might persuade the ECB to ramp up its government bond purchases. A German led 6 nation bond issuance for Club Med countries is also making the rounds.

How credible is all this chatter, speculation?  Who knows! 

Market just needs hope out of the Eurozone to move.  This weekend is sounding familiar to the start of October rally as we rallied into summits. Note Dec 8/9 summits noted last week. Also, finance minister meeting next few days.

What’s likely also important is its post-thanksgiving/ successful Black Friday after a big market dump last week. It is simply in a position to bounce due to seasonality and recent sell off.

”If the market is to rally in the last 5-6 weeks from Thanksgiving as it has consistently over the years.." Market needs Financials to move like they did during October rally.

A question is how long will this momentum last? Most of the recent upward moves have failed almost immediately, (see even last Friday).

Diving into ES futures up 30-35 handles to approx. 1188 in front of key resistance at 1200 could be a risky proposition.

Ahead of the open, (29-11)

Despite most of the IMF, pact speculation being denied, US markets still managed to squeeze pretty hard most of the day and only closed 5 pts off the SP highs. Volume suggests most were still on vacation or just not believing the move to get off the sidelines.  If the longs only come out and play, SP low 1200 should fall, otherwise this move will eventually be faded and this will be just another countertrend rally.

Higher beta stocks and luxury group were jumped as in every oversized rally. The interesting aspect and negative was the move in Treasuries. Banks also faltered before closing well, suggesting it wasn’t all risk-on. If this rally ahead of summits continues, financials need to confirm.

A bond auction in Italy will be in focus in Europe (Italian 10 yield still above 7%). It will be viewed positively, if the amount sold is in the top range. < 8bln target. EU Finance ministers likely will provide further details on leveraging the EFSF, but this shouldn’t be all that noteworthy.

In all, need to see low SP1200’s decisively broken to get on the Eurozone ‘hope’ bandwagon.

Ahead of the open, (30-11)

Entering the trading day, cited the lack of overall participation (volumes down Monday-25%-30%) and the financial sector as notable missing links from the oversold rally day. Despite what will go down as back to back up days, the same trends (financials very weak, BAC,MS) were visible kept the market from more upside” ..need to see low 1200’s decisively broken..” .  Although, most are looking at low 1200’s,(50ma) as the breakout level to a broader recovery to mid 1200’s for SP, it’s been noted here recently 1215’ish - DJIM benchmark 20ma(1225) would be a hurdle on a bounce. All in today, it seemed every market lift, pre-market included post a successful Italian sale and solid “eco data (consumer confidence) was faded.  Do note, consumer sentiment escalating does not mean Q4 consumer spending is a given. Last report was very weak, but didn’t show a big decrease in consumer spending.

Also as noted, EFSF details were not noteworthy as it is not ~4-5x leveraged (1-2 trillion), but market has known for days this thing is a dud.  This is why all eyes are on IMF and hopeful ECB gifts to them to give out.

Most will say a big rally needs to be digested and that is what could be implied today, but Financial weakness was already present during rally day, so it’s not that much of an encouraging day. Still, recently, noted Banks downgrades before end of month, now it’s happened as SP Dg’d 15 banks in US/Europe. The fact this was telegraphed recently to the market, it is probably priced in by now and explains some of the recent underperformance. If it is priced as expected, 50ma should fall next few days.

A leading sector (luxury retailers) yesterday was disappointing today following a guidance call from TIF that weighted on the space. TIF has been a fixture on this Shadowlist for a few years now and can’t recall a disappointing report from the name in that span. The GLW report threw some water on all the post Black Friday hype as far as tech and it’s toys are concerned. Corning is not just tv’s, it’s also tablets, which showed weaker demand. (OVTI guidance AH`s talks of several order cutbacks from Smartphones to tabs to PC`s) Combined, these reports cool off, ‘consumer discretionary’ and some of the glee going forward.

As we come to Dec 8/9 summits with many other events, leader speeches before, be prepared (possible swings), the market will be dominated by headlines and speculation intraday to what will happen or not happen as been the case from past summits.