Overhangs slowly being removed...
Thursday, June 30, 2011 at 07:43AM Buoyant market mood continued overnight/premarket heading into Greek austerity vote as fears dissipated. A brief sell the news occurred immediately following the passing vote, but the buoyancy prevailed for another day allowing for more upside with 20ma holding a day 2. The month end/Q end fix was still in effect, notably TSY getting hammered for another day as clearly allocation into equities is undertaken along with USD/Euro hedging. Slowly, market overhangs are being removed, but earnings/debt ceiling progress ahead need to path the way for this to matter. It’s almost an all or nothing scenario as far as overhang removals to let market roam higher in Q3 and beyond.
Note. Even prior to earnings kick off mid July, we’ll have days of possible pre-announcements (noted Europe blow ups past week) with chance of estimates to be reined in by analysts as bottom up number may be too high. Hence, we’d not expect much chasing of this weeks action as in longs coming out, just yet.
In all, Japan IP numbers showing a V-shape recovery and a few more ‘ruling’ overhangs on financials playing act favourably were the positive takeaways today ahead of Global PMI’s on Friday. As noted yesterday those numbers should be pretty bad, but what we will probably see is these #’s ‘priced /baked in as these become possible laggards with eyes on IP numbers (like Japan’s) being the crucial #’s ahead. Market will likely hold 20ma, if not SP1300 into the long weekend. Still, this weeks joyriders laid off the high beta names with some profit taking underway today, so we’d expect any further upside to be curtailed in small cap area next few days. It will be of interest to see if Financials can take on some leadership after a week of positives (clarity) for the sector. The clarity recieved goes along with usual pre-earnings strength seen in recent Q's, so it's possible.