Quick Market Touch

by Dan August 17, 2011 9:16 am • Commentary

As I write at 9am most European indices are up small except the DAX and the FTSE which are down about 50 bps, but up at least 1% off of their morning lows…..The Euro is up vs the Dollar, and approaching key resistance at 1.45.  I don’t really get this move, but the range between 1.40 and 1.45 is looking pretty interesting…..most currency strategists that I see on tv have considered this to be a very trade-able pattern, buying 1.40 and selling 1.50/1.51…….while I think the Euro has a host of structural problems this next break above 1.45 could maybe see some legs to 1.50 on pure technicals.  The trend channel had been sloping down making a series of lower lows and lower highs, but that could be about to change.

1 YR Euro vs Dollar from Bloomberg LP


Corporate earnings should be the focus again and I think we are likely to see a mixed picture as evidenced by the last couple days.  We have seen positive results and guidance from the likes of WMT, HD and TGT and then cautious views of revenue growth for the balance of the year from DELL as a result of weakness from the consumer and lack of visibility.  Also ANF  is trading down 7% this morning, as the quarter was decent but the outlook is a bit foggy…..they are talking about rising costs and not giving color on gross margins,  I think we will continue to see limited visability as Q3 progresses and this will cause greater single stock volatility.

Also sticking with retail, I want to keep an eye on higher end retail though, names like COH and TIF which were some of the first retails to break in the market sell-off have yet to really regain any footing.  Continued weakness in names like this tell me that investors are moving downstream a bit to lower end retail possibly bracing for what could very likely be an extended recessionary environment.

Chinese Internet names BIDU and SINA gotten beaten up yesterday as China’s state run news agency rehashed a story from a few years back about how they handle certain ads and the company could face greater regulation (read here).  Most Wall Street analysts defended the stock (read here) but what I find interesting is that in the wake of the past year’s fraud associated with their western listings (see Sino-Forrest, read here) that any scrutiny from within China on the companies thought to be the most reputable could be very damaging to investor sentiment and cause greater volatility in these names.

I remain cautious of the bounce and want to sell rallies, I continue to be focused on the bank stocks and am waiting for them to make new lows from last week and take the broad market with it……