Closing Market Commentary For 07-19-2012

Another sideways market day, low volume and no financial reporting of any importance tomorrow. Just the options expiration which might keep the market numbers up. This something I am not remotely interested in going long. I just wonder when the break is going to happen. The Russell 200 is again lagging by 0.25% while the large caps are so sure what to do either as the green ceiling measures less than 25% too.

You would have thought that this morning would have been a real downer to investors but it didn’t. Which makes me believe the institutional boy’s are very slowly dumping and perhaps hedging building a nest egg that will look profitable towards year end. It kinda makes sense as small sells would become the profitable buys later on and perhaps off-set the ‘big dump’ that is coming. Just a thought in trying to figure out what the heck is holding up this market as it sure isn’t smart investors.

About the best article that reflects my thoughts today is the following by Eric Parnell. Many are holding out for more QE, but what if we do get more QE and the market continues to move downward?

Looking To Greece For Stock Market Wisdom

“And as we begin through the heart of the latest earnings season, corporations are still operating at peak profit margins with little scope to maintain, much less sustainably increase, earnings given the global backdrop.

Such are usually the conditions that lead to a sustained stock correction, particularly in a market that has rallied so swiftly from its October 2011 lows. But stock investors today do not fancy such concerns. Instead, they continue to opt for the hope that the stock market will continue higher on the euphoria of more policy support. But a dependency on such hope is careless, for harsh reality must eventually rear its ugly head. And the next several months promise to put such careless hope to the test once again.

Following this latest hope rally, stocks have arrived at a critical battle line in working to continue their move higher. At around 1370 on the S&P 500, stocks have run into the downward sloping trend line dating back to its early April 2012 peak.

What is perhaps more notable is the long trip we have endured in stocks over the last 15 months to simply arrive back where we started.

This longer-term view on the stock market raises an important point. The notion that monetary policy support will endlessly lift stock prices higher is increasingly falling apart.

What does this mean for investor sentiment going forward? It is understandable that stocks are clinging to the careless hope for more QE. After all, such policy support is pretty much all the market has left. And we can already assume that if the Fed does not deliver QE3 at its July 31-August 1 meeting, the talking heads will immediately start pointing to Jackson Hole as the next stop for the QE hope train, no matter that past QE programs have failed to support a sustained economic recovery. But imbedded in this desperate hope is a critically important question. What happens if the Fed actually delivers more QE to the market, but stocks do not go up? Worse yet, what happens if the Fed launches QE3 and the stock market continues to go down?

The DOW at 4:00 is at 12943 up 34.66 or 0.27%.

The 500 is at 1376 up 3.73 or 0.27%.

The $RUT is at 802.17 down 2.89 or -0.36%. It has to do better than this for the markets to continue upward.

SPY is at 137.80 up 0.45 or 0.31%.

The trend is moderately positive and the current bias is neutral.

WTI oil is at 92.29 trading between 89.80 and 92.90 and the bias is negative.

Gold is at 1581 trading between 1572 and 1591 with a neutral bias.

Dr. Copper is at 3.53 up from 3.47 earlier.

As reported earlier the USD rose from 82.80 to 83.24 settling at 82.99.

The 500 at the close.

The DOW at the close.

@SA

Google (GOOG): Q2 EPS of $10.12 beats by $0.08. Revenue of $8.36B (+21% Y/Y) misses by $50M. Shares +3.9%

TSMC (TSM -2.3%) closes lower after missing Q2 estimates. As the world’s biggest chip foundry, TSMC’s performance can shed a light on broader chip demand. The company is guiding for Q3 sales to grow 6%-8% Q/Q, largely in-line with estimates, but also cautions distributor and customer inventors are high, with the former expected to reach 12 days above seasonality by the end of Q3. An inventory correction is expected in Q4, though TSMC is still guiding for above-seasonal performance.

Johnson Controls (JCI -8.2%) shares plunge after the car battery maker missed its FQ3 earnings target. While Europe’s auto production cutbacks have been a concern, JCI also noted prices for spent battery cores surged to all-time highs last quarter. While cutting its FQ4 outlook, JCI doesn’t expect the combination of soft demand and higher input costs to continue into next fiscal year.

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Written by Gary