Ahead of the open, (06-01)
Friday, January 6, 2012 at 06:33AM As market participants slowly return, they are greeted by ‘rinse and repeat’ action. Once again, morning losses to SP1266 off fresh Eurozone fears turned into new 2 day highs by mid –day(SP 1282). As discussed yesterday, Eurozone negative headlines should not sway one’s U.S equity trading decisions at this juncture or that the previously risk- on indicator/Euro currency is sinking. Also, premise here to start the week of an upward bias due to economic data since global PMI’s t continued with the usually unreliable ADP# that came in at 325K. Overstating the potential NFP# by ADP or not, it’s in the consensus direction and consistent with recent U.S data, which is most important. If ADP# was say 100k, all the previous related employment data would be questioned today.
In all, the EU hangover into the New Year is not going away. This week has been quiet on the EU front as speculated despite all the fear mongering, thus adding to the bullish sentiment. Next week, things really pick up with leader summits, ECB meeting, possible S&P action and investors may position themselves late in the day (selling) for such, especially if the NFP gives the market another boost in the morning.
To be honest, the fact China (Shang) is suffering again despite PMI’s coming over the ‘50’ mark is a bigger concern than Europe.
Today’s, sour Euro’ soup, primarily consisted of capital raising worries by Euro’ banks in this type of market place, not the actual countries they make their home in for a change. This is not an indication of broad trouble coming. It is likely a fear stemming from Italy’s UniCredit’s stock issue deal (~40% discount) this week, a shareholder problem (market cap dilution) with individual banks is a way to sum it up. While the EU Bank indexes sink across the pond this week, the US financials/banks lead the morning equity bounces. It is the 3rd consecutive day of financials making the Daily Journal (some sort of record), which began as a note of buying in 2011 largest trailers ie. BAC, C. Now, that this financial rally (best sector in ’12 so far, BKX up > 5%) is being picked up by the talking heads mid-day, it is probably time to sell soon. As in past Q’s, this sector moves into earnings which could be happening again. To avoid another head fake by this sector, sell initial rally and buy the dip is likely the best strategy here.
“….Consumer discretionary/retail late weakness is a little ominous (maybe only due to hesitation before Thursday’ same store #’s’. Jan.3. . Update: The numbers were very mixed, if not soft overall as some well- known, strong names pulled a shade of SHLD. Only name reporting today falling under our Shadowlist coverage was ULTA, which was quite positive and moved nicely higher.