Despite Global markets weakness (>1+% off) overnight, markets here opened only a few pts lower at the higher end of the gap at SPX1321. It was just a matter of time before a catch up to the world would ensue and the ‘cluster’of “S” would be tested. Soon after the Bears got the upper hand as ‘demand destruction’ headlines from IEA, SaudI Arabia weak demand comment and GS follow up to their basket commodity long trade close’ yesterday, adding crude to experience pullback to $105 was too much too handle for the Bulls. Most of the emphasis was placed on GS’s call in the media, but in reality the steep selling should have occurred on Tuesday when the first commodity basket close hit the wires. In this view, it was the ‘destruction’ headlines that spooked investors, not GS, which is infamous for their direction call shenanigans as they change course quite quickly.
A few probably scratched their heads as to why a lower crude would not be beneficial to the broad market at this point. The key is simply ‘demand destruction’, which is goes beyond the shopper pumping gas to go the mall. Only airlines/retailers benefited today. The commodities deteriorated late Monday off the GS note and the selling just picked up steam as ‘destruction’ headlines hit. Add, below par AA earnings, a bunch of tech linked mid caps earnings giving poor outlooks and the Bulls had a lot of headwinds to overcome today. Techincally.. SPX1310 was about all the Bulls had left today as 20Ma was hit early and market stabilized intraday As usual in the marketplace, an important technical level is compromised with a ‘catalytic’ event of some sort, this time we know what's ahead and that is earnings with JPM and a few notable Naz/tech links reporting shortly.
In all, considering all the negative’s above and below in Shadowlist components, add the fact Washington (debt ceiling) is a tailwind as well, it wasn’t that bad a final boxscore today for the Bulls. Any good news now will likely have the market continue the bounce off ~ 1310.
Shadowlist
■Commodities – A sizable ~3% shellacking with XLE, OIH breaking below the bottom of a trendline that starts from September’10.. Entering April 4th trading day,”….. As the coal trade here likely cools off shortly,…”, Since WLT,CLF faves here off 10% and a victim today of being a high beta energy trade casualty. Not much in commodity linked space to consider in the very short term.
■Financials - Wednesday’s start to financial earnings will likely decide if 20ma holds tomorrow, banks/brokers held up today despite GS cutting a few names, primarily holding due to JPM’s EPS hours away.
■Momentum/ earnings/ winners of ’10 – It’s not a surprise the ‘smells like rotation’ from early last week didn’t materialize to anything but a bad odour... “ AMC, TXN bought a grandfather of a semi stock for a huge premium. It will likely be a very temporary boost as pre-announcements possibilities are first and foremost in investor’s minds”. The SOX (off ~2% today) rally fizzled and today hit multi week fresh lows proving it was nothing more than short covering …” The initial ramp in Naz, semi’s was pure good old fashioned short covering as their semi home got raided. Post-short covering, the conviction buyers simply stayed away despite all the upgrades in semi’s”.
Mid caps earnings so far continue to be a headwind (MCRL latest relates to Samsung) and therefore anything wireless related gets hit today. Coupled with Japan uncertainties on outlook weighing on group and the tech sector is in need of some good news. Bigger names, ASML/ADTN reports will be watched BMO.
Still ,some pockets of life today in NVDA/ Networking/optical were not bad today as the well known opticals names like ALU CIEN did alright, while RVBD, which has been smoked for the last month put water on Wells Fargo negative preview of it's EPS after market closed.