fade jobs..
Thursday, July 21, 2011 at 07:33AM Considering all week, we’ve noted earning-linked stocks have been faded/ limited upside, it’s really no surprise the broad market joined in and faded an 8pt ES pre-market gain along w/ AAPL, which played a pivotal role in the ES gain.
Market participants finally grasped what we’ve been saying all week and that is majority of strong reports are being faded. WYNN followed Tuesday and today it was AAPL/ VMW. Same theme is occurring in after hours today. The problem is not only sell the news (profit taking) in names that ran in early July as part of rally, but the fact is no one wants to join a market with so many Macro overhangs. Long only players don’t want to chase and that’s playing a big part in earning stocks not going higher. Fading is not just sell on the news(profit taking), it’s a lack of buyers!. If you want to see why this happening, just look at GS and Blackrock Fink’s comments on the challenging environment we're in.. GS missed because management decided to roll back risk and BLK, world’s largest asset manager said.. “Some of our clients are actually de-risking and are slowing down their investment decisions…what is driving much of this confusion and uncertainty is politics globally…. Nevertheless, it is very impressive for me to watch how corporate earnings continue to be driven. And importantly, this is why I believe those customers who are de-risking….there are many customers who are de-risking because they're focusing on today's headlines, I think it is a mistake”.
All in, only way to get investors involved is for macro overhangs to lift and reactions to earnings will change. The positive and reason market held in today again is shorts don’t want to be part of all of this either. Upside risk on any resolutions is keeping them away as well.
A few days ago, noted Global preliminary July PMI’s to watch mid-week, especially China holding 50 level. Well, we’re here and China's is below 50 (which signals contraction of it’s manufacturing), but hopefully it can be overshadowed by European summit/debt ceiling noise, just like earnings!. How's that for desperate measures!
As far as summit, watch for credit line extension promises to countries other than Greece as a ‘potential’ best news scenario for markets to come out of it. If this doesn’t occur contagion fears will likely rise again and market will react with part of 'Hope' rally evaporating. A Greece deal is not enough.