Ahead of the open, (28-12)
Wednesday, December 28, 2011 at 05:04AM If we go back to the trading Journals (last week of 2010), we find that the market finds itself in the same predicaments 1 year later. This does not mean the same thin liquidity due to investors, corporations and policymakers hibernating into year end, but the fact after all the turmoil this year, the market finds itself dealing with the same internal market plight.. ”All in, the broader market once again failed to breakout 1260SPX, even though breaking out on holiday volume means little, it still shows conviction buying is far from coming back..”December 30, 2010. In fact, same underlying characteristics of the marketplace are evident in this slow grind up as unfinished business/closing off books and window dressing has not included ‘growth stocks/higher beta’ buying as witnessed by R2K underperformance late last week.
However, around noon the R2K for whatever reason finally snapped up and hurdled the major indices and outperformed into the close by 50bps. Unfortunately, the positive tape action was offset by the other potential trigger as Financials lagged by 50bps and SP finished flat at 1265…”Judging by the financials here and overseas…the sector could provide an added spark and trigger a move higher”.(pre-xmas).
All in, a decent day giving some hope with a small cap pick up, growth retailers and beaten up software linked stocks acting best and the place to look for follow through, if any. (Names were listed last week in both sectors).
As the market has little to go on (little on calendar of significance), it tries to hang itself onto anything just to make noise, such as the 'implied' importance of Italian debt auctions coming up (Wed/Thurs). The yields are already pushing 7% for days and market has been shrugging it off. If a negative outcome and market sells-off any, it will be bought on the dip. The reason the yields have been going in opposite directions to Spain’s since recent push of liquidity is because Italy has a heavy redemption calendar of EU~65bln in January. The caution is really pointing at January, not this week’s selling of Italian paper.