Ahead of the open (15-12)

Heading into the trading following a ‘big’ market up Summit day, cited underneath Eurozone mess, the market was paying no attention to the unfavorable guidance coming out from ‘tech’ specifically, which relates to markets complacency towards the ‘real’ economy effect from Europe(growth). The profit warning list from this weekend has been topped up generously this week.

A few days of slow selling has turned into a market rout overall with the underlying tape seeing a liquidation crush in commodities, tech indicies filling November gaps and high beta-momo’ performing much worse than the closely followed major indicies (DJIA, SPX). 

Today’s down tape confirmed all warnings noted a couple of days ago…a break of 20ma (DJIM benchmark), a ‘death cross 20/50ma with the loudest market noise being the plunge in the Euro/ Gold markets last few days, which was foreshadowed by Monday’s note on Euro and Gold selling off simultaneously.  The selling in commodities (copper,crude) is simply growth concerns finally showing up. The selling in Gold, silver is realization no global QE is at hand. This is not the type of selling we are accustomed to.  It’s not from pure Eurozone fear/panic with large one day drops spaced out (sov’bond yields ok, ECB measure from Thurs a help as noted), but instead a sell off that is grinding away (intraday as well) at every risk class, a small piece at a time. Now, we’re even seeing our long time, growth high end retailers, which have preserved all year taking it on the chin in the last few trading days.(TIF, VFC, PVH,RL,LULU, UA), indicating growth prospects are in question and spreading. Seemingly, this is the perfect group to go short as it’s one the last shoes to drop, if the real economy is in deep trouble.

The downward pressure on EURO continuing (likely), makes the idea of an equity rally remote into year end

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Morning Update:

Global PMI’s better than feared. After yesterday’s haywire action in EURO, commods’, the PMI’s may settle the unwind trade down a bit (as in hours, not days). Waiting on S&P and what it does to France’s rating (2 notch cut would be worst outcome), others might be bought by market.