Ahead of the open, (29-02)

Only today was the DJIA able to close over the ‘irrelevant’ (in this view) mark of the supposed ‘psychological’ 13k+ after numerous crosses back and forth.  Luckily, it hasn’t been noted here for the past 8 sessions that saw intraday highs above this mark each and every day.  Here, it’s not even ‘psychological’ level, just an excuse for market to chat about something that hasn’t occurred in years.  Here, more importantly SP did have a magnet at SP1370 noted as early as Feb 10 and soon after when SP dipped to ~30 handles lower than today’s close.  “Still, although the tape is seemingly going sideways, it’s really gliding and can move into SP1370 this month after hitting our 1350’s target on a breakout from 1327”.(feb.10). In the past two weeks, DJIA has gone literally nowhere (maybe 100-150pts), while SP has climbed 30-35 handles and even more since the ‘technical’ breakout consequences/importance at SP1327. Interestingly, despite this late February outperformance fact, it’s been the ‘winner’ sectors of ’12 that have corrected the most without hampering the SPX advance at all. This was pointed out in part the other day….”The fact SP hangs on while all the beta rally sectors succumb to some lessening of exposure is a positive so far.” Feb 23.

Still, let’s not fool ourselves; the recent grind has affected individual stocks as the hesitation in the overall market has taken its toll on single stocks as well.  Despite the pause - climb – pause -climb climb since low 1300’s to 1370’s, there has been no panic lately to chase winners, momentum stocks.  Today, we had PCLN, GOOG, AAPL all go at once.  Is this the necessary sign for more gains as traders begin to chase the leaders, momo’s, earnings or was the overall lag in RUT, transports the true tell today.  All in, it’s probably best to wait for the events ahead this week to dictate market direction.

On the eve of the second ‘LTRO’ tender day and the #1 (LTRO #1) reason behind the rally, the question regurgitated here is what happens when the ECB liquidity ‘music stops’ in the weeks ahead.  If the number is inline tomorrow, it may just be anti-climatic (best result) for the time being.  What will the investor do and think later?, if there is only ‘accommodative’ short term durations injections given out going forward.  How much and how long will the confidence flush instilled last before we do it “crisis’ it all over again in the Eurogroup?.

Into the trading week, (Apr. 23- )

The week long whipsaw being called a Bull/ Bear battle is a little extreme considering neither side has conviction to put money where their mouths are.  In this view, it’s more of a standoff than a battle as investors keep watch from a distance.  One result of the recent action is chartists, mostly Bear ones have come out in numbers with their Bear wedges, Bear flags now to give the week/ month long action some color.  If some market direction occurs soon, they will say it was in the charts.  But, the real culprit will always turn out to be a catalytic event and we’re coming into a few weeks of possible triggers for such.

To sum up last week’s action, it’s surprising the SP was actually able to muster a gain as the tape had reason to be ‘heavy’.  The lingering Euro’ debt crisis , ‘light’ eco’ data (notably, Initial claims #) , toss in noise “crumbles’ about AAPL nearly testing its 50Ma for the first time in 4 months and festering noise of a repeat of 2011 action as we come into the cyclical ‘sell in May’ buzz.  The negativity was offset by the ‘calming' earnings.  As discussed recently, market will know trends quickly off earnings and that’s the case now with important names in each important sector out of the way.  Best gauges are out of the way and Q1 is positive considering the weak global growth hand dealt.

On deck this week,

Initial claims, this may turn out to be the vital market puzzle piece this week (post 2 light weeks of numbers). Earnings will not overshadow eco’ data as they did last week.  Now, eco’ data has to compliment the earnings.  If  I’C’ #  number keeps on trending up to 400k it will invoke fear of a weakening labor market.  NFP# is a few weeks away and this Initial claims is last for April’s NFP#. 

FOMC,  market will look for changes in the growth rhetoric due to the recent eco’ data, specifically last NFP and Initial claims. Also, economic, rate tightening forecasts are on tap.  Policy will most likely be reaffirmed.

Earnings, it becomes a single stock story as major trends known. Still, one sector really interested in is the ‘retail’ luxury/ growth space to see if momentum is continuing. (COH reports, early March it was quite positive).  Of course, AAPL is on Tues. Last week, closely followed here, URI  PII VMW  FFIV  UA  were viewed positively. Add MLNX  to list off report last week.

China, China who?.  Now that we’ve escaped ‘hard landing’ again , Shang’ the best market in April.  Flash PMI’s early this week. Recall discrepancy between these HSBC #’s vs, gov’t.

Europe, Besides EU flash PMI’s, it’s a quiet schedule of events with politics taking over with May 6 elections in France/Greece. 

Ahead of the open, (01-05)

Chi PMI plunge, Financials down for the month, AAPL retrace of earnings, first red month since November… and the market as a whole is falling apart at the seams!.  That pretty well  sums up the Bear spiel today.  Unfortunately, these arguments have little merit here following a 4 day SP run, major Global markets closed today or planning to be tomorrow for May Day.  Today was just more of the digestive action continuing from Friday..” A little digestion of 3% uptick since Monday’s low is in order, but mentality should revert to buying the dips, which eventually would allow for SP 1400 to be reclaimed”.(BMO 27-04).  Recall, it’s the 1370-1400 range noted here for weeks, not 1370-1390 ‘box’ noted for breakout in many places that matters.  It will take consecutive closes over SP1400 for the level to be reclaimed by the ‘longs’.

  

Bottom line, nothing changed the playing field today, market is waiting for key April eco’ data later this week (see Into the trading week).

Ahead of the open, (29-06)

Any doubt if the previous day’s morning rally was artificial was answered by the Dow ~170+, SP’s 18 handle drop at its trough.  Any question if it’s a fast traders market was answered by the Dow ~150/ SP+ 15 recovery surge in the last hours off a ‘cancelled Merkel conference’ headline leading to the possibility of a EU deal at hand.   The fact it’s a ‘renters’ ES/ETF market was also evident as single stocks hardly participated in the rally with most coming little off their lows with many ‘growth’ names still off 2-5%..KORS ,FFIV, VMW  just some names at the high end. (MA,  PCLN off 10pts and even AAPL -5pts).  Hardly what you’d call an inspiring tape for the longer than an hour or day.

 

 

...but wait...

  

A deal has really been struck tonight and the euphoria has pushed ES over 1340.  The question on many minds tomorrow will be how long before this shine wears off and we have another anti-climactic moment as we did following Spain’s bailout and Greece’s elections??. Those fading the upside tomorrow on that notion may be in for a surprise.  We discussed only needing a credible deal and at this juncture it seems to be, which should allow the market to end decent on the week, month and Q.   It will be interesting to see how long the short covering lasts and if 'longs' emerge afterwards.  '24-48hr renters' need to go, investors need to show signs of life.. In all, the fact we finally got a surprise out of a EU summit is a positive and it would be a disappointment (and surprise here) if market doesn't end the Q on a good note.

  

The immediate summit need of reducing Spain’s borrowing costs/ sov’ balance sheet woes due to banks debts was ratified with Germany caving in on bond buying.  Italy also gets a lighter set of conditions to reduce its borrowing costs.  Question here is ‘show me the money’ as there is over ~2 trillion of debt in Spain’s /Italy’s sheets and about a ~1/4 of that is in the ESM/EFSF funds.  Overall, this the big surprise with a gift for Ireland who take home a ‘surprise’ cake as well.  Breaking up the sov’/ bank link seems to be broken.  Also, a proposal of direct control covering all banks by a European ‘banking supervision system’ seems to be on track to recap the banks if need be. Still the details need to be seen and analyzed.  This is the first step to the ‘banking union’ expectation discussed here in the past leading up to the summit.

 

All in, a humbling 24hrs for Germany and a celebration for Italy and Spain.  Germany backed into a corner politically by Italy/Spain not signing off on the (small)120bln growth pact until borrowing costs issues addressed and for its football team on the pitch with Italy and Spain up for the Euro cup now this weekend.  As for the markets, it’s time to look at ahead to the ECB on July 5^th and earnings season around the corner.  Yep, that’s how the market works..on to the next!.  Expectation now will rise for ECB rate cuts and some LTRO as ECB should be pleased with the summit results to go ahead with easing measures.  Also, earnings expectations are depressed, thus any surprises (better than feared) and/or signs it’s not that bad should also be a market positive to go with possible ECB actions.

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.

Ahead of the open, (25-07)

A second consecutive day where intraday market loses are cut in half by close due to CB policy speculation.  Yesterday it was the ECB, today it was the FED as a WSJ article talked of earlier action and was specific on details for the first time, (thus Jackson Hole/ FOMC next week may set details for what will follow).  If anything the odds on dates changed some and importantly put pressure on ECB to do something on 02/08.

 

  

Although todays downward draft was blamed on more EZ stresses, (note at day’s trough, US markets were underperforming EZ markets by over 1%), the real culprit was U.S earnings as the higher bar premise noted entering the week was the driver….(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.). Simply what was working last week isn’t this week as weak earnings are not rallying any longer. ( DD TXN, UPS ).  This is even more visible AH’s as growth/higher beta names get slaughtered after missing, (AAPL, BWLD, NFLX, TRIP).  It will interesting to see if the bar gets re-set back again due to AAPL's miss particularly in tech links.  All in, UPS’ call put it all (economy/earnings) into perspective as it talked of certain conditions only seen in recessions).

As bad as EZ stresses, Eco/ earnings momentum slowdown might be, it is also raising the odds of CB policy response. This in turn keeps market in its summer range.  The upside risk of action is keeping a floor to the market as shorts don’t want be involved in another upward surge.

Ahead of the open, (26-07)

‘Longs’ may have dueled to a draw today, but you can still sense the nervousness of market possibly falling off a cliff.  A few more articles (like WSJ’s) overnight and everyone was trying to anticipate the policy makers next move to save such from occurring,  while limiting downside in the meantime.   Expectations definitely rose in the last 24hrs for action from the ECB &FED with Precious metals signalling such  'expectation' today. 

  

Positive to start the day was sov’ yields tightened, Euro rallied due to ECB Novotny'scomments,…“there are arguments to be made for the ESM to get a banking license”...  This took market by surprise, ECB talking about it shows they will get involved ‘if ‘ Spain/Italy were to lose market access.   Simply this is reassuring to the market although it would be weeks away.  

  

Although AAPL was the big story on Tuesday night, it was overshadowed by CB chatter today.

 

(Semi’s/ networking stocks had some good earnings, but nothing too exciting considering last week’s reports have surrendered their initial gains already).

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Morning update:  Pretty Strong ECB Draghi comments....

Eurozone more stronger than people anticipate and added that the ECB will do whatever is takes to preserve the euro (“ and believe me, it will be enough…EBC has power to defeat market speculation”).