DJIM #30 2011
Monday, July 25, 2011 at 07:31AM A lot of debt ceiling fear mongering over the weekend has gapped down ES at futures open. It’s no surprise the ‘unthinkable’ outcome is gaining traction as informal July 22 deadline falls without a deal. But, judging the treasury/bond market of late, we’d say the only unthinkable was if there was no NFL season!. We’d continue to look at the TSY/bond market for what the market really thinks on the issue and inevitable outcome. Still, rating agencies will eventually downgrade US ratings even if a compromise is reached as it will not reach expectations of the agencies.
Aside from the US political mess, US earnings will be heavily followed on a more single stock basis because the market pretty well can see overall trends in most areas of the economy as most important companies/sectors have reported (financials, industrials, tech). Notably, a dislocation in mega caps vs. small/mid caps earnings is seen by the lagging RUT late in the week. Also, most of the gains in SP is dominated by only a handful of stocks like APPL,GOOG. All in, IBM/GOOG have set a high bar and hence a lot of fading of inline reports and/or blow ups have occurred due to higher expectations. At some point this trend will end and that is something to monitor to see if sidelined buyers are stepping up.
Shadowlist
Earnings Q3 linked- added ACTG and DTLK to Shadowlist following earnings. ACTG is also an under radar play on IP/patents fever since Nortel’s portfolio sale.
