Bulls find a bit of stimulus from varied but apparently, very pleasing reports from around the globe Friday. As of 11:30 ET the SP-500 (SPY) is up 1.15% and confirming a less-than-simple-at-times, six-day pullback from fresh channel support.
Not too shabby for Friday the 13th. Bulls are back in business after six sessions of lower lows in the SP-500 and net profit-taking of about 2.75%. Mostly weak reports this morning have found bulls incentivized once more to see policymakers hands forced into action in order to jumpstart global markets and contain credit market contagions and the likes.
In the featured spotlight, Q2 GDP growth of 7.6% for China compared to 2011’s marker of 8.1% and set a three year low. A narrow miss of 0.1% versus forecasts of 7.7% is allowing bulls the provisional spin of “head I win, tails you lose.” Traders buying into the results are either relieved the data wasn’t a huge miss or hopeful its weakness is still sufficient to prod the country’s central bank to stimulate the economy with additional monetary efforts.
Separately, stabilizing 9.5% industrial production growth for China appears to be acting as secondary confirmation for further action by officials. The 0.2% month-over-month increase is just off last month’s 9.3% three-year low and well off last year’s, same period result of 15.1%.
Across the other pond, Moody’s downgrade of Italian debt by two notches is also being taken in stride with the MSCI Italy ETF (EWI) up 1.0% and the EUR/USD up 0.20%. Again, a more optimistic interpretation of a potentially disruptive catalyst could be finding bulls growing expectant of policymakers coming to the rescue with more forceful action in the near future.
And stateside, modestly weaker-than-expected consumer sentiment data out of Michigan hasn’t stopped bulls from cheering the broader market to fresh highs. Intraday, a preliminary reading of July consumer sentiment showed a dip of 1.2 points to 72.0 versus Street estimates hopeful of a slight increase to 73.5.
In those intertwined markets of influence, the SPDRs Financial ETF (XLF) is leading the broader market with gains of 2.30% while confirming its own multi-day pullback off fresh, uptrend channel support. Well-received and typical convoluted reports unworthy of swallowing at face value at JPMorgan (JPM) and Wells Fargo (WFC) are being hoisted higher by 6% and 3.25% respectively.
For JP’s pardon or umm part, the outfit announced profits of $1.21 per share after finagling many “moving parts” and “a number of one-time items related to its CIO losses” according to Briefing.com and which may or may not be comparable to Capital IQ views of $0.75 per share.
Revenues dropped by 16.5% but sales of $22.89B did manage to top forecasts of $21.7B and management would really, really like to implement a share buyback right now, but will wait until a board review is complete and the company can submit a new capital plan to regulators at the Fed.
The iShares Bull ETF (AAPL) is up 0.75% but somewhat surprisingly, failing to maintain its symbiotic relationship of leading the market higher during broad-based, bullish festivities. Today’s lagging behavior follows Apple’s removal from Citi’s “Champions” list on Thursday and an iPhone unit estimate cut by boutique Avian Securities this morning.
Analysts at Avian expect Apple’s iPhone 4S legacy sales will be below 20.0 million units with the Street forecasting approximately 25.0 million. Technically and for the bulls, Friday’s action has Apple stock confirming a potential handle pivot low within the right side of its corrective three-month base.
In “other” commodity sightings, the US Oil Fund (USO) is strapped in for today’s more jovial market ride with slight relative strength gains of 1.60%. By the same token (mostly) shares of silver (SLV) and gold (GLD) are up 1.10% to 1.40% and largely matching the broader market, while the Greenback (UUP) is off 0.40% in unsurprising profit-taking given investors improved outlook on a not-so-scary Friday.
And whether it’s the dog jumping happily through hoops or the tail following the action, the VIX ($VIX) is off 7.50% near 17% within its fairly narrow but often edgy, two week trading range of 16.50% to 19.50%. With the sentiment gauge back also back below its 10SMA by a small margin, confident but not complacent sponsorship of Friday’s rally is clearly evident as bulls attempt to take in some weekend decay at historically neutral levels well-removed from any potential and unwanted price shocks in the market.
Finally and in those sometimes accurate heat-seeking option markets, is it “Supervalu” or “Special Victims Unit” (SVU) for the grocer getting bagged to fresh multi-year lows for a second straight session? With shares off another 6.70% on top of Thursday’s 49% earnings-related fallout, option traders appear to be looking at further deterioration with puts leading by a 2.68-to-1.0 margin and premiums firmly bid well outside multi-month range values and prior statistical volatility.
On the other hand and worth considering, given mixed open interest versus volume and a couple of its most actively traded put options being fairly deep at this point (August 5 and 4 put), the closing out of positions is certainly an option, pardon the pun, not to be overlooked. Also, today’s implieds which are hovering in the low 100s to high 100s compared to prior levels in the mid double digits aren’t really that outlandish and indicative of panicked buyers.
Lower priced stocks will typically receive much larger-looking implieds as the vega per point is radically smaller. Further, compared to current 10, 20 and 90-day statistical readings of 340%, 245% and 124% versus very recent trends of about 30% to 50%; whether put traders are looking to bag further gains as bears or bulls is a good deal less clear.
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