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Market Outlook: Risk On Thursday

EconMatters's picture




 

 

By EconMatters, Wed. August 15, 2012

 

Cisco

 

Well, miracles do still happen, that dog of a stock for the last (too long to count) actually beat for the quarter, yes I am talking about Cisco. Cisco quarterly reports often send the market down 200 points; they have woefully underperformed the market by a large margin. Not only did Cisco have a good quarter in this environment, but they raised their dividend by 75%. Can you say short squeeze tomorrow? If all goes well in the conference call with reasonable guidance, and given the preview on CNBC, expect a big Risk On day tomorrow for equities. 

 

Chart Source: Yahoo Finance, Aug. 15, 2012

 

In fact, because we are right up against resistance in several markets such as Oil, Bonds and the S&P, the volume should finally pick up and some key resistance levels could get blown through on Thursday. Cisco is one of those bellwether stocks that either lifts or plunges the rest of the market; expect a nice pop at the opening as shorts are pushed a little outside their comfort zones on Thursday.

 

The next question is whether tomorrow`s potential rally if it does play out as I anticipate will be a rally that can finish the day on the highs or is a prime candidate for the fade team to come in at the highs and sell into with gusto. But hey one miracle at a time, what`s next HP beating and having a good quarter as well? That`s probably too much to ask for but if they do the shorts could get a much higher entry point.

 

Oil Markets 


Other things to watch out for on Thursday are if Crude Oil can take the next leg up after a bullish inventory report. If WTI breaks above $95 on Thursday then the $100 level is in play again with that range being from $92 to $99.70 yes remember that range. Gas prices have been going up, not sure who is buying all this gas, but inventories are starting to get stretched.

 

 

Chart Source: FT.com, August 15, 2012

 

 

My first impression is that the US is now exporting more gas than previously as an arbitrage play with cheaper WTI versus Brent being attractive for exports in the southern region of the US. But whatever the case, whether Iran Oil has really been off the grey market it cannot be denied that US refineries are running like crazy and we have lopped off 20 million barrels off the Oil inventory picture in short fashion.

 

So watch Crude Oil, as Brent is already moving towards pricing in an Iranian escalation of tensions and seems headed towards $120 a barrel relatively quick. Some trial balloons in the media seem to be taking hold coming out of Israel, stay tuned to this circus show as it could get quite scary and provide some interesting election fodder for the candidates.

 

Bonds

 

Well, the 10-year is bumping up against the 1.8% area, let`s watch tomorrow for some continuation of this move with traders getting pushed to some extent, and does a big move tomorrow push some safe haven capital into riskier assets on Thursday. The bond market could steal the show at the opening as that trade is so crowded I would hate to see even a glimpse of what that repositioning might look like with its derivative effect playing out for Risk Assets.

 

 

Chart Source: Yahoo Finance, August 15, 2012

 

 

All in all, we should expect much higher volumes on Thursday with some key levels tested in some pivotal markets, much better than the snooze fest of the past three days. When in doubt follow the price! 


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Thu, 08/16/2012 - 05:15 | 2709483 ebworthen
ebworthen's picture

Lots of snoozing as everyone waits for Jackson Hole and the end of the European Vacation.

I wouldn't be betting one way or the other as the average schmuck and fund will get the news flash about easing or some collapse a minute too late and more than a dollar short.

Thu, 08/16/2012 - 08:51 | 2709672 covert
covert's picture

as usual, the markets  are over speculated.

http://expose2.wordpress.com/2011/11/20/a-voice-from-the-dark/

 

Wed, 08/15/2012 - 23:54 | 2709247 YesWeKahn
YesWeKahn's picture

Wrong, it will be another low volume day until the option expiration day. A lot of money to be made on that day, nobody wants to commit too much.

Wed, 08/15/2012 - 23:35 | 2709202 BeetleBailey
BeetleBailey's picture

Risk on...Risk Off.....

OK...where is that fucking Miyagi..............hit him.....

AGAIN!

 

...AND AGAIN!

 

......AND......AGAIN!

Wed, 08/15/2012 - 23:03 | 2709142 beachdude
beachdude's picture

Rates will go up when china, japan, et al dumps our debt on the open market.
Even our printing presses won't be able to keep up.

Wed, 08/15/2012 - 22:36 | 2709099 ThunderingTurd
ThunderingTurd's picture

The Guberment CAN NOT AFFORD HIGHER RATES.  It is that simple.  Rates will go nowhere into perpetuity.  We will have price inflation but rate inflation won't come.  Additionally, the short term rate has an r-squared of approximately .8% in relation with the direction of long-rates.  Not going to move, but prices are going up.  

Wed, 08/15/2012 - 22:14 | 2709045 rsnoble
rsnoble's picture

Newsflash: after I viewed the multi-year chart of CSCO---anyone who was short, rather earnings or not, deserved to get fried. Only an idiot would be short at this level. Oh yeah sure, let's short a multi-year support low. Duh. And before earnings as well. Earnings suck period, but the correct play would've been long at the 2009 low and hold into earnings.

Wed, 08/15/2012 - 21:43 | 2708974 bigkahuna
bigkahuna's picture

Toss in yer fiat boys!

Wed, 08/15/2012 - 20:57 | 2708864 Squid Vicious
Squid Vicious's picture

LOL - risk on because Cisco made the earnings # and beat their watered down rev guidance by 90 million?? ok, i will cover everything at the open...

Wed, 08/15/2012 - 19:44 | 2708717 FieldingMellish
FieldingMellish's picture

Oh happy day if true! TBT, she is the business tomorrow! Goldman's much wanted vol+vol could appear as well. Got risk?

Wed, 08/15/2012 - 18:56 | 2708582 bank guy in Brussels
bank guy in Brussels's picture

Some years ago, Jim Sinclair said that in the several stages of the US debacle, the really final milepost was the top (i.e., low yield) in the long bond ...

The opposite extreme of 1981, when the 30-year hit 15.25% ... and the 10-year was 10.84%!

At the time in 1981 many people were scared to buy the things but that was obviously the great bond buy.

Sinclair was speaking of the really long bond, but the 10-year like in the chart above maybe works close to as well ...

Looking at the yields climbing back up, it makes me think it would be quite something if the top ... this top of nearly a quarter millenium of US debt history, that we may never again see in our lifetimes ... if the top has already come and gone!

Thu, 08/16/2012 - 04:43 | 2709466 boogerbently
boogerbently's picture

Most analysis refer to "normal market", this is NOT.

Thu, 08/16/2012 - 00:58 | 2709338 The Monkey
The Monkey's picture

We are certainly close to what will likely be a lifetime low yield in treasuries. Most likely, yields will be low for many years to come (between 2 and 5% on the 30 year).

But, I wouldn't want to be holding any at sub 300 basis points. That is for sure!

Wed, 08/15/2012 - 20:05 | 2708756 Wm the Shrubber
Wm the Shrubber's picture

We have yet to see the top for bonds.  We've barely begun the deleveraging process, having merely shifted from the private to the public sector.  Rising rates would be the death knell for all global economies addicted to free money.  We'll see 1% on the 10-year before this cycle turns.

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