Saturday, May 12, 2012

Weekend Trading Thoughts on May 12, 2012

It has been a while since I posted charts. I know you were hungry for them... (click on charts to enlarge)

Let's update the latest macro developments first, and I am sure that I will repeat some things most of you already know: from European train wreck resulting in possible enterprise IT spending slowdown (despite INTC reaffirming guidance), to JPM's trading mishap weighing on too-big-to-manage banks, to China's slower growth (weakest Industrial Production growth in 3 yrs was just reported), to slower growth in U.S. as well.
Watch U.S. Industrial Production, Regional Mfg Surveys, and Retail Sales next week. On the latter - by far the most important report next week is going to be monthly retail sales on Tuesday, as slower consumer spending growth is now showing up in weekly chain store sales...

So the underlying macro theme is slower growth everywhere, also reflected in reports from India, Brazil, and Australia. This can not be good for equity markets around the world, especially heading into slower part of the year...

That said, one has to wonder how much of the above has already been priced in. Investors have been fleeing U.S. equity mutual funds for a while. Investor sentiment (% bullish) is getting to very important contrarian levels. Many risk charts (world equities and many commodities) have been breaking down since March, and only now "the general", U.S. stock market, is catching up with the rest. In old-school theory, a bottom is near when the generals get shot. How near?? SPX 1300 would be my best guess...

% Bulls/SPY






No comments:

Post a Comment