Into the trading week, (23-07)

As noted ahead of Thursday’s trade, better earnings off watered down expectations (specifically SOX/tech) had pushed market to EZ summit levels, but it was also the quietness in Europe responsible for the feat.   A break over summit highs rested with…” quietness in EZ needs to stay on track for this to occur”.   Unfortunately not only did a break not occur, but a gradual sell off ensued (DJIA -120, NASD -40, SP -14), Friday as Spanish yields surged nearly to 7.5%, pushing U.S markets to close at the lows of the day. (Spain IBEX suffered its worst day in 2 years as its Valencia region announced it would seek a bailout.).  This is somewhat separate from the recent ‘bank’ bailout, but shows regionals will affect the Federal gov’t balance sheet as well.

  

In all, Spain’s regional problems have little to do with the EZ summit blueprint, thus today was likely an overreaction by markets.  A rally with so many question marks in investor minds is vulnerable and easily diverted.  In all, there are more important things heading into next week’s trading due to Friday’s market internals….

  

Firstly,  rally in tech off ‘good enough’ earnings is likely over with and priced in as we head into the meat of reporting season.(inc. AAPL)  A week of such behaviour will change to stocks needing to beat and have better 2H outlooks now to have similar reactions to last week’s.   Also, one underlying momo’  growth market left was the consumer discretionary space and it too now has been dissected due to CMG’s report as it took the likes of MNST, BLWD, WFM types down > 4% with it.   ISRG , also showed if you’ve become a growth story with high expectations over time, you must be perfect or you’ll be hit.  Although the ‘growth’ story outperformed on Thursday, Consumer discretionary growth theme action doesn’t bode well as the smell evaporated quickly…”This smells of rotation, but at this point it’s still just a lot of covering in tech linked stocks”.  Lastly, “Financials stepping up would enhance the possibilities of a higher SP price. There was no sign of such emerging to end the week.

  

Besides earnings spotlight, market gets the flash July Global PMI’s as the first major July releases by Tuesday morning.