Modest out-the-gate profit-taking meets up with interested shoppers Monday despite poor retail sales data. As of 11:15 ET the SP-500 (SPY) is flat and near session highs as bulls continue to back Friday’s channel, not Chanel, shopping spree.
Following a modest round of disappointing catalysts this morning punctuated by a wide miss and surprise decline in retail sales data, bulls are fighting bravely back to Friday’s effervescent highs. Action that day confirmed a six-day pullback into channel support for the SP-500 with a 1.65% gain securing a flat weekly result.
On the officially-sanctioned economic front, a surprise decline and rather wide miss for June’s retail sales tempted would-be profit-takers out-the-gate focused exclusively on raw and harsh-looking data rather than the possibility of additional Fed action. By the numbers, a decline of 0.5% in total sales upended Street forecasts calling for an increase of 0.2%.
Monday’s data marks a third straight month of falling sales and a sign of a struggling consumer amidst a flailing economic recovery. Not convinced? Factoring out auto sales and those stifling hot car lots, sales showed a dip of 0.4% despite the allure of air conditioned malls in a country enmeshed with record-breaking temperatures. There as well, analysts were caught flat-footed with estimates of a 0.1% increase.
Across the pond to the east, on the heels of Friday’s disappointing Chinese GDP and industrial production data, talk of China’s economic recovery needing more time from Premier Jiabao, but sans fresh monetary stimulus, has left bulls likely feeling slightly defeated but possibly still hopeful of imminent addition action from the country’s central bank.
In corporate confessionals this morning and in front of a wave of key reports from the likes of Google (GOOG), Intel (INTC), General Electric (GE) and IBM (IBM), it’s all about Citigroup (C) quite literally, figuratively and apparently quite boringly too. Following decent if not convoluted results from peers and financial heavyweights JPMorgan (JPM) and Wells Fargo (WFC) which helped fuel Friday’s broad-based market fireworks, Citigroup topped profit views by $0.05 on earnings of $0.95 per share.
At the same time, the Anchor Banker did announce a modest sales miss of $18.6B versus forecasts of $18.9B. In turn it appears, the whole enchilada has allowed for some spied hindsight, armchair declarations of “Predictable and Uninspiring” from Monday's headlines. Intraday, shares of C are up 0.85%.
Conversely, the SPDRs Financial ETF (XLF) is off 0.25%, Wells Fargo is flat and shares of JPMorgan are seeing a whale-sized loss of 2.75%. The latter appears to be under pressure after esteemed sector analyst Dick Bove of Rochdale Securities candidly posited the question of how much money can JPMorgan make from its regular operations while being interviewed on CNBC’s Squawk Box.
In those intertwined markets of influence, the EUR/USD is bid 0.13% with relative quiet on the western front of credit market conflicts. Technically, with the pair trading at 1.225, action is confined inside a weekly doji candle.
The broader trend in the EUR/USD remains bearish with the next visible support near 1.18 and its June 2010 bottom. Not to be ignored though, a move above 1.230 could be viewed as a pattern disruption and potentially a bullish pattern breaker as the prior June pivot low is reclaimed and shorts are put in the position of possibly being forced to cover.
The iShares Bull ETF (AAPL) which lagged technically during Friday’s broad bullish show following an estimate cut by boutique Avian Securities and Thursday’s “Champions” list removal on Thursday by Citigroup, are up 0.65% and leading the broader averages. Shares of Apple are bullishly carving out a handle within the upper third of its three month corrective base. News this morning has a report from AppleInsider stating the iPhone 5 has entered the production phase with design changes which include the addition of glass to the unit’s “uni-body” backplate.
In “other” commodity sightings, the US Oil Fund (USO) is pulling off a similar feat with its 0.65% increase. Not only is the oil proxy matching Apple’s gains, USO is also building a multi-day consolidation. In this instance the USO is trying to “handle” a breakout of 50SMA overhead resistance after establishing an eight month double bottom a couple weeks back.
Finally and in those sometimes accurate heat-seeking option markets, the VIX ($VIX) is up by a few pennies and nearing the 17% level. The sentiment gauge is fairly neutral short-term as it approaches its 10SMA, as well as being fairly “Swiss” on an absolute historical basis.
The price action in the VIX looks promising and more conducive for market bulls than not. The one caveat at this time would be to watch for neutral / confident behavior to remain removed from bearish complacency readings which would occur if the instrument stretched 15% or more below its mean-reverting, short-term moving average.
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.
