Lots of Noise this Morn

by Dan July 7, 2011 9:10 am • Commentary

As of 9AM the S&P futures are up 1% on a whole host of news this am that is being perceived fairly positively as we head into some important data on jobs tomorrow and earnings next week that include AA, C, JPM, INTC, and GOOG.  While the number of S&P 500 companies reporting next week is slim, these few should help to determine whether the “soft patch” of data that we started to get in late spring was just that…….if Q2 results are in line and Q3 guidance is better than expected say hello to new highs!  

This Morn’s Data:

ECB not surprisingly raised interest rates 25 bps to 1.50% the highest rate since 2009 in an effort to battle inflation fears vs the fear of sovereign debt crisis among their weaker nations stoking deflationary fears.  The Euro has suffered this week for a whole host of reasons but largely since Moody’s downgrade of Portugal sovereign debt to junk and increased fears that the crisis is certainly not over and likely to widen a bit.

-Chart below shows the wedge that the FXE is making and likely will resolve itself one way or the other in short order…..I am of the belief it does so to the downside…..would expect it to pause at $140 and will look to roll the July 140/138/136 Put Fly that I bought last month into August (read more here).

[caption id="attachment_3100" align="aligncenter" width="300" caption="1 Yr FXE chart provided by Bloomberg LP"][/caption]


-The Jobs data continues to be a mixed bag as 2 prices of data reported this morning appeared to be better than expected with Initial Unemployment Claims decreasing vs expectations while the  ADP report showed that U.S. companies hired more workers than expected in June….all eyes will be on the Payrolls and Unemployment rate tomorrow morning.

-Same Store Sales Data for June came in better than expected for the likes of TGT, JWN, COST and GPS to name a few….this should help buoy the sector and aid fears about a weakening consumer.

My Take Here: While I remain cautious on the rally it seems as usual everyone wants it to go up….the higher we go as we head into earnings season the more vulnerable we are to a “sell the news” reaction…..but as I said above, if companies throw caution to the wind as they give outlook for the balance of the year than watch out because the fix may be in and “they” may gun them to uncharted territory.

– I will continue to look for opportunities on the short side where I believe single names have overshot to the upside and the good news is in them, and will also continue to look for laggards and try to determine events that could catalyze a move higher.  Additionally I will look to make tactical macro bets when I feel the markets are under-pricing specific risks and getting too euphoric.

-as always move your feet and don’t get too stubborn, trim positions when profits exist and  cut your losses when you lose conviction.