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Overnight Sentiment: Oversold Bounce Overdue
There was no good news overnight: CSCO (a rather prominent DJIA member) imploded on global demand weakness, China posted a larger than expected trade surplus which however was due to a greater than expected drop in imports, European industrial production was slightly better in Italy but offset by worse than expected news out of France (as for Greece - forget it), while all the attention continues to be focus on how the Greek endgame plays out, and now Spain too. Still, futures are on the cusp of greenness simply because following 6 days of declines stocks are oversold, and will desperately try to rally into any good news: such as initial claims later today, which will once again be spun as "declining" following a bigger upward revision to last week's number, making this week's appear to drop... at least until next week. As usual be on the watch for any erroneous headlines based on spurious rumors out of Greek developments: these tend to more the EURUSD, and thus ES, quite violently.
From BofA:
Market action
Global equity markets are selling off as investors remain particularly concerned with the implications of the ongoing political uncertainty in the euro area. A disorderly default - i.e. Greece leaving the euro area without support from other European countries - would be likely to spark contagion and could even lead to the unraveling of the euro area unless euro area leaders managed to build a big enough firewall to prevent contagion from a disorderly default spreading to the region's other countries.
Those fears sent most Asian equity markets in the red. The worst performer was the Hang Seng down 0.5% while the Japanese Nikkei fell 0.4%. Both the Indian Sensex and the Korean Kospi finished 0.3% lower. The one exception was the Shanghai Composite which managed to recover its early trading losses and finish up 0.1%.
In Europe, equities are down 0.7% in the aggregate. After finishing 0.7% lower yesterday, the S&P 500 is set to shed another 0.1% today.
US Treasuries are mixed. The five-year is bid with its yield down 1bp to 0.75%, the 10-year yield is up 3bp to 1.85% and the long bond is trading flat at 3.03%. After selling off sharply yesterday, Spain's 10-year note is bid 1bp to 6.01%. Tomorrow Spain will officially announce its plan to help clean up its banking sector. For more on that story see: Spanish Banks, 09 May 2012.
The dollar is rallying with the DXY index up 0.1%. Commodities are selling off with WTI crude down 68 cents to $96.11 and gold off $1.33 to $1,588.20 an ounce.
Overseas data wrap-up
Japan posted a current-account surplus of 1.59 trillion yen for a second month in a row in March on an increase in overseas investment income, even as higher energy demand boosted imports. Income from investment abroad is offsetting the country's import bill which is swelling because of increased energy imports after nuclear reactors were shut down because of last year's crisis at the Fukushima plant.
China reported a trade surplus of $18.4 billion in April almost double the consensus of 9.8 billions. The bigger than expected trade deficit was due to very weak import growth of just 0.3% yoy below consensus expectations of a 10.9% yoy increase. Meanwhile, exports only increased 4.9% yoy below expectations of a 8.5% gain. Exports are being hurt by the recession in Europe while imports were hurt by weaker domestic demand. Overall today's report added pressure on the government to ease policies to spur expansion, as well as put more pressure on the central bank to build on two cuts in the banks' reserve requirements since late November.
Industrial production in the euro area came in better than expected in Italy and the Netherlands for March. Meanwhile, industrial production in France was weaker than expected. Forward looking indicators such as the PMI manufacturing report point to a slowing in the manufacturing sector in the months ahead. Our euro area economists expect the region to remain in recession for the rest of the year.
Today's events
A number of important data releases are due out at 8:30 am. Initial jobless claims are expected to rise to 370,000 for the week ending May 5 from 365,000 the week prior. Next, import prices are likely to decline -0.4% month-on-month in April, a significant pullback from their petroleum-led 1.3% spike in March.
Following this, the trade deficit is likely to widen to $51.0bn in March after the sharp narrowing in February. Imports plunged by the most in three years in February owing to a drop in crude oil imports and demand for Chinese goods. We also think export growth should continue to be held back by the euro area recession. This report has a good chance to alter Q1 GDP tracking since the BEA estimate of the March trade balance assumes an even more dramatic widening in the trade deficit than we or the consensus. Hence, the risk is that Q1 GDP is revised higher after the trade report.
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Who would seriously commit a single dime to the market right now?
Better things to do on the retail end while the Algos kneecap their owners. Put them to the lofty heights that their balance sheets require. Nice thing the higher it goes the harder the margins and credit facilities fail.
CPL I would BTFD
"...oversold..."
Bullshit! This farse of a market has been overbought since January, and now futures have retraced all of yesterday's losses. Fucking horseshit.
Eventually the bright lights at the casino dull, the veneer fades and BTFD is ignored.
If you feel like chasing a no volume situation, feel free, I'll be waiting for something interesting in the meanwhile.
Oversold?
Somehow, the ("oversold" / "overbought") wordcount in the MSM seems a bit on the high side.
We had horrendous news, and the DJIA has slid, what, a few percent? However, when we have ONE good news story and the market rallies by the equal amount, that never leads to an "overbought" article.
Lies and deceits.
Well I´m planning to get laid tonight and I sure hope it´s not gonna be with a chick that´s either overbought nor oversold nor...period.
but if the packaging is still in mint condition stuff will also get messy.
It's mothers day this weekend so retail sales will GO UP AND THE DOW WILL EXPLODE ON THE UPSIDE!! DOW 15000 HERE WE COME!!!!!!
FUCK YEAH!!
EVERYBODY SHOULD BUY THEIR MOTHERS THAT STERLING SILVER TEA SET FOR ONLY 5.999,99$!!!
...unless you don't love your mother who gave life to you off course...
than only 2 rolls of silver eagles will do to...
Take a look at what these latest industrial productions numbers actually mean. The article quoted from below compares Greece now to 2005 and look at the worst category 26.9!
No wonder the Greek stock market is worth just over a tenth of what it was worth when she joined the Euro...
LMFAO.
The good old "oversold bounce" shit. Right.
And....yep, ES goes up 7 handles in 15 minutes for no reason.
I enjoy your musings but you're going to piss people off eventually, there are folks here who have based their entire life on this thing being 'real'.
Pissing people off is just part of my charm.
This isn't real, at all. It's just a means to legally steal from the ignorant. In my humble opinion.
hehe now its overbought. It will stay overbought for a long time. They intervene when it stays oversold too long. Got to keep the dream alive for the ignorant. Unfortunatly I am one because I play the game. Got to scalp these days because swing trading is for the birds. No way I hold anything overnight.
The Bernank has the approval of investors....go figure.
http://www.bloomberg.com/news/2012-05-10/bernanke-gets-75-approval-from-investors-in-global-poll.html
Which investors?
The useless legion of ivy leaguers that made the problem in the first place. I'm glad they are. It'll teach them soon enough that asking for what you deserve is sometimes the complete opposite of what you want.
It use to be markets rode the escalator up, the elevator down. Now it's the opposite. Rallies are like weather balloon launches, selling is like parachuting.
Selling gold has it advantages!