July 23rd, 2012
in Gary's blogging
Opening Market Commentary For 07-23-2012
Markets opened down as weekend news from Europe and poor earnings from McDonalds (MCD) pour in. INO reports Spanish government's borrowing costs hit an alarming 7.56 percent Monday for its 10-year bond and will soon find that it can't buy within affordable costs restraints. Greece faces an aid cutoff as it lags on making the reforms demanded in return for the money. Oil and gold futures are down as Italian and Greek exchanges have fallen 4% and 6,7% respectively. US investors are reacting with alarm on the prospects of the EU falling further into disrepair.
The Eurozone has officially jumped on the recession train edging one nation closer to the fiscal cliff and the end of the Euro as we know it. The Eurozone Titanic is taking on debt faster than expected and slipping below the waters of 'Dire Straits'.
The DOW futures were off 200 points before the opening warning of things to come while the SP500 futures were off 20 points. The red volume was only moderate as the markets opened, but markets were decidedly lower. As the 10 minute mark arrived spooked investors started selling in earnest as the red volume moved higher as did the $VIX jumping above 20 for the first time in weeks.
By 10 am the bias was down, red volume heavy and generally the RRR** looked good, especially if you went short on Friday. For today I am going to watch the action expecting a correction (bull trap) shorting after I see the USD fall to 83.61 closing the gap made earlier. The morning market action was generally over as investors picked the pieces of their longs purchased last week. I was dismayed to see my MCD came in with lower earnings missing by $-0.06 and earning down 20M. The stock only fell 3.62 never reaching the top 10 decline list. It is recovering and now is up 1.38 points.
The DOW at 10:00 is at 12605 down 215.85 or 1.68%.
The 500 is at 1339 down 23.27 or 1.71%.
The $RUT is at 775.50 down 16.04 or 2.03%.
SPY is at 134.02 down 2.45 or 1.80%.
The trend is down and the current bias is down.
WTI oil is at 88.14 trading between 91.60 and 88.00 and the bias is negative.
Brent crude is at 102.61 trading between 106 and 102 and the bias is negative.
Gold is down today at 1571 trading between 1582 and 1563 with a negative bias.
Dr. Copper is at 3.35 down from 3.44 earlier. Quite a drop.
Earlier the USD gaped from 83.61 to 83.72 then climbed to 84.13 and recovered to 84.04 at the US session opening at 9:30. Remember that gaps are usually closed on the FOREX sooner than later and look for a USD decline with the US market responding in a positive demeanor. So this mornings decline will soon have an up-tick, watch for it and trade accordingly.
Spain bans short selling on all stocks for three months. Ban could be extended beyond 3 months.
US CHICAGO FED NATIONAL ACTIVITY INDEX RISES TO -0.15 IN JUNE. PREVIOUS REVISED TO -0.48 FROM -0.45. [Medium importance]
The Europe debt crisis is flaring up again. Bad news about Spain's economy and finances are feeding fears it will be the next European country to need a bailout. The Spanish government's borrowing costs hit an alarming 7.56 percent Monday for its 10-year bond. That's a key benchmark suggesting Spain may soon find itself unable to borrow affordably _ and need outside loans.
On top of that Greece is heading into tough negotiations with other eurozone countries about whether it deserves more bailout money. Greece has lagged on making the reforms demanded in return for the money. An aid cutoff could mean leaving the euro. Markets don't like what they see. Stocks are down all over Europe after sliding on Friday. Wall Street futures are down. The euro fell too.
European markets are sharply downtoday in the wake of poor news coming from the EU. The FTSE 100 in London is down -2.44% while the German DAX is down -3.88%. The CAC 40 in France is down -2.93%. The Asian markets closed down with the Hang Seng at -2.99. The Shanghai Composite down -1.26%. The Nikkei down -1.86%.
Stock markets tumbled, Spanish borrowing costs touched new highs and the euro slumped to its lowest level against the yen in almost 12 years on Monday as Spain's debt crisis deepened, raising concerns over the wider eurozone.
Italian schools may not be able to open after the summer break if a latest round of spending cuts is implemented, according to body that represents Italian provinces.
The Athens Stock Exchange has now fallen by 6.7pc today. The IBEX 35 in Madrid has clawed back some of its losses, and is currently down 3.5pc, while the FTSE Mib in Italy is down 4pc, and the CAC 40 in Paris has fallen 2.1pc.
Greece will not receive its next bail-out tranche until September at the earliest, the European Commission has reiterated.
A spokesman said:
The decision on the next disbursement will only be taken once the ongoing review is completed [...] over the last few months, significant delays in programme implementation have occured due to the double parliamentary elections in the spring.
Two Greek government bonds totalling €3.1bn will mature on August 20.
The delay means Athens could be forced to raise money on the debt markets to repay them - at a very high cost
Trading has been suspended in several stocks on the Milan stock exchange.
The pain in Spain is spreading to Italy. Italian daily La Stampa is reporting that ten Italian regions, including Campania and Sicily, are facing trouble with their finances.
Citing government sources, the Italian daily said that big holes had been revealed in municipal accounts and that "at least 10 big cities" faced problems.
** RRR = Risk Reward Ratio
To contact me with suggestions or deserved praise:
Written by Gary