Bulls bounce back from a “major challenge” Friday in front of the main event from Jackson Hole and a flurry of mixed global economic data. As of 10:05 ET the SP-500 (SPY) is up 0.25% and trying to confirm yesterday’s relative fear has turned fearful of missing out on a test of key support.
On the heels of the IMF’s “major challenge” warning regarding the implementation of measures for Greece and one which saw a fearful ($VIX) closing test of 1400 in the SP-500, a braver game face intent on technical bargain-hunting is trying to prevail with plenty of economic triggers to stimulate bulls into action one way or the other.
Across-the-pond and on the radar Friday morning, Japanese industrial production fell 1.2% and came in weaker than forecast with sluggish demand from China and Europe primary drags. Japanese household spending rose 1.7% compared to last year. And Tokyo Core CPI data dropped 0.5% year-over-year.
Top brass from China suggested there’s room (again) for additional monetary stimulus while being confident in future growth. At the same time, Goldman Sachs expects a cyclical recovery for the country in the back half of 2012.
From the Eurozone, retail sales data out of Germany saw a wide miss with a drop of 1.0% year-over-year compared to forecasts of a 0.4% increase. At the same time, unemployment for the broader region came in at a dizzying but expected 11.3%. Unconfirmed reports have Spain’s policymakers setting up a banking facility for its bad loans and the EU is expected to announce the ECB as the standalone institution for issuing bank licenses.
Stateside and causing a bit of technical backtracking, investors are reacting apprehensively to a trio of reports showing better-than-forecast consumer sentiment and factory orders and slightly weak regional manufacturing data. By the numbers, a final reading of the Michigan Consumer Sentiment Survey came in at 74.3 versus a flat estimate of 73.6.
Separately, Factory Orders for July rose by 2.8% and topped Street views of 2.0%. At the same time, the Chicago PMI for August saw a modest slip from 53.7 to 53.0 and contrary to expectations calling for a narrow one-tenth of a percent improvement to 53.8.
In those intertwined markets of notice and sometimes influence, the EUR/USD is up 0.60%. Today’s strength is signaling a consolidation breakout within the currency pair’s up-channel. Eurozone ETFs (GREK, EWG, EWI and EWP) are trading firmly higher within existing congestion patterns and led by Spain’s (EWP) 3.0% gain.
Metals gold (GLD) and silver (SLV) are looking a bit more precious with gains of about 1% each and the former confirming a technical hold of its 200SMA and the latter reversing back above the longer-term moving average within several days of lateral, but bumpy consolidation work.
Finally and with Fed Speak just getting underway, the VIX ($VIX) is mostly flat near 17.65% and continues to look more technically supportive for equities than not. Thursday’s highs of 18% managed to push the sentiment gauge a full 15% above its mean-reverting 10SMA.
Readings of 15% or greater in the VIX are prone to reversing back towards the short-term average to neutralize relative extremes. As the signal occurred as part of a bigger daily picture in which fresh three-plus week highs were secured within more historically normalized levels of fearfully good behavior less panicked about the fear of missing out; that’s an arrow in the bulls quiver during bear season.
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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