DJIM #29 2010
Monday, July 19, 2010 at 07:00AM The surveyors at University Michigan (MCSI) must have caught some folks at the wrong time early in July. A one time drop (nearly 10 points) in the consumer sentiment reminiscent of post 911, post Lehman, post Katrina soured investor tastes. Add some bad BAC and investors fled the market in numbers. How much weight do we put in the number?. Well, the question is post-( what? ) is this number all about?. Nothing new as far we can see! Also, recall a big reason for the 9% rally starting …Sentiment was already known to be horrid and at historic lows, so this shouldn‘t come as a complete surprise and so we‘re just going to move on. (“The doom and gloom is excessive and most measures of market sentiment prove it as we are at March ‘09 lows or at 2010 low's in other sentiment readings“).
The sticker shocker of the MCSI played right into the market’s fatigue and failure to get over the April/ June/ July trendline we’ve concentrated on here. The break of the hrly gap at 1078-1080 played to perfection as we closed SPX1064, almost halving the rally gains! …“Problem arising with upside is if it’s not broken soon, Bulls will give up for the time being (take profits) and allow 1080/20ma to falter.”
After the initial hit of the April- June trendline on July 13th, our strategy here was to throw out what holdings we had and concentrate on fresh plays entering EPS season. Right now, macro is overwhelming the micro camp, but with the majority of SP corporations reporting in the next 2 weeks, we don’t think the fight is so easily won by the macro’s just yet. By concentrating on fresh EPS, we can avoid the overall market fight. Even if the macro’s win, we shouldn’t be hurt by only concentrating on the EPS winners as they come. If those plays don’t come, you’re simply flat a market that is dealing with a loss of global growth momo' that is greater than anticipated half way through this year. That's not a bad thing to be.
*Euro Stress tests to be published this week.
