A moody but maybe friendly reminder of credit market risk and mixed data tangle with Monday’s bull. As of 11:45 ET the SP-500 (SPY) is off a ho-hum 0.25%, but showing subtle signs a move higher is going to need to refuel first.
Following Monday’s move towards greater clarity as Greece signed off on the EU’s austerity package demands, credit ratings agency Moody’s has reduced traders risk appetites. Analysts late yesterday cut sovereign debt on Eurozone Debt PIIGS Spain by two notches, one notch for both Italy and Portugal and administered negative outlooks for core constituents France and a less jolly U.K.
Countering the warning of credit market risks still apparently ever-present, Japan surprised traders with a sizable $129B expansion of its asset purchase program following a two-day meeting from the famously conservative central bank. Also, Germany, the Eurozone’s largest economic engine, also provided a bit of good news as ZEW index data showed a sizable improvement in business sentiment.
Stateside economic data has been mixed but appears to have lent itself to the business of modest profit-taking still central to Tuesday’s trading program. Retail sales data for January fell well short of estimates calling for an increase of 0.8% with an actual figure of 0.4%, though an improvement over December’s flat reading. Axing the auto component, sales jumped by a better-than-expected 0.7% compared to forecasts of 0.5% and a sharp rebound from the prior period’s decline of 0.5%.
Separately, “unexciting” import / export data showed a 0.1% increase sans black gold and flat exports barring agricultural items per Briefing. And intraday, business inventories for December rose by 0.4% in narrowly missing forecasts of 0.5%.
In those intertwined markets of notice, the EUR/USD is flashing an early warning sign of possible forthcoming consolidation in equity markets. The currency pair is off 0.35% and is following through on yesterday’s key break of 1.32. The next decisive technical level looks to be a test of the February lows and 50SMA near 1.30.
Lower bond yields and a 0.70% push in the 20-Yr (TLT) above its 10SMA is also suggesting a bit of caution and rotation from bulls into safer havens. On or still in the other hand, Apple (AAPL) is still doing its muscular part to keep the broader market appearing more confident in its profit-taking than would otherwise be the case--and not the one lining one's must-have gadget.
Shares of the no. 1 capitalization issue and roughly 4% of the SP-500 are bucking the tide with a modest gain of 0.20% in less shy all-time-high territory above $500. Background headlines likely read from one’s iPad or iPhone include the company may test a 8” tablet and China seeking a trading ban on the iPad for obvious enough reasons.
Finally and in those sometimes accurate heat-seeking option markets and the time it takes to complete an article, with the SP-500 now off a still less-than menacing but slightly stiffer 0.55%, the VIX ($VIX) is adding on 6.0% to push past 20% and trade about 8% above its 10SMA.
Of late, we’ve been bullish in this type situation as the sentiment gauge closes in on a overly-fearful signal indicative of a pullback opportunity in the broader market. Yet, with the discussed secondary signals flashing early signs of a likely pause in the major indices, today’s analysis thinks looking at those premiums for their protective value, rather than a more bullish buying opportunity, makes even more sense and possibly likely cents in the near-term.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
