I guess things are falling a bit into place for the bulls here; disaster in Greece temporarily averted, the patch of bad economic data that we had seen for weeks has all been forgotten even in the face of the conclusion of QE2 and strong earnings by the likes of FDX, BBBY and NKE have given bears enough reasons to question their views.
This bear for instance has lightened up on a lot of short positions as the confluence of events, including the tapping of the strategic petroleum reserve in a coordinated fashion, further signify that the “feds” will do anything and everything possible to keep this ship from listing. I for one am not going to fight this until we get a sense for the second half outlook by large U.S. companies in the coming weeks….
Yesterday’s market action was particularly impressive when you consider that many market participants thought there was a good chance that after the Greek Parliament austerity votes were tallied that we could have seen a “sell the news” reaction as the world equity markets had all but anticipated this outcome. The fact that the SPX closed on the dead highs, on a day that also saw gold and crude rally, tells me that traders are in catch up mode and looking to mark things a bit into quarter and month end…..The SPX is still down 1.4% this quarter, even after the near disastrous performance in the month (the SPX still down 2.8% month to date after rallying 4% from last weeks lows).
The strong performance by both energy and financial stocks could be the final nail in the coffin for those (me) looking for a retest of the March lows in the very near term. Bank stocks have shrugged off the better than expected news from earlier in the week regarding capital surcharges, but got a fierce rally going after BAC agreed to a massive settlement for $8.5billion resulting from claims from investors about faulty subprime securities. To add fuel to the fire, the feds lifted the cap on debit card fees sending shares of V and MA surging to up 11% and 15% respectively and helping the gains of C, JPM and BAC who also have exposure.
A large part of my bearish thesis has been the massive under-performance of the banks stocks and I have often said that if and when they bottom, they will help the market regain its ground and set up for new highs….a sustained rally in the space would make many bears throw in the towel. The week of July 11th will see earnings from JPM and C. This, in my opinion, will be a defining event for the sector near term…..Most banks reported what appeared to be better than expected earnings for Q1 back in April, only to see their stocks get smooshed….the action into earnings and their reaction on the way out may hold the key to whether we have bottomed. I will have some ways to play in the coming days, but in the meantime look at some earlier thoughts on the sector here.
Tech continues to be a mixed bag as speculative tech is unstoppable aided by the performance of new issues like LNKD , P and yesterday’s latest AWAY, which debuted with an almost 50% rally. The repeated news reports about Zynga, Groupon, Living Social have fueled this past weeks massive rally in recently depressed LNKD and P. This action doesn’t really warrant much attention to serious investors other than that it tells you a little bit about risk appetites by some.
INTC continues to under-perform the recent rally and a close eye should be kept on the name as quarter end could bring a pre-announcement…..
NTAP hosting an analyst meeting today and investors will keep a listen for any backtracking or support of the recent upside guidance given for the current quarter in late May.
DELL saw a nice pop after they reiterated their recent guidance and gave some strategic clarity….
Market likely to hold again staging an impressive 4 day rally and could add to inflows of cash to the equity markets in the coming days of the start of Q3…..I have not totally abandoned my bearish thesis, and now that distractions in Europe have subsided for the time being, we can get back to what I deem to be the main focus for our economy; U.S. corporate earnings and the pace of our recovery. Stay tuned for ways to play.