TODAY’S S&P 500 SET-UP - June 20, 2011
Delaying a European decision is not what markets wanted this morning. Confusion is starting to breed contempt across asset classes as a result: oil collapsing, Spanish and Italian equities getting tagged and UST Bonds bid higher. While it's difficult to discern whether this immediate-term TRADE breakout in the US Dollar is due to QG2 ending, a Debt Ceiling compromise in July, or European contagion ending - the answer is probably all of the above.
The line that matters for the EURO/USD = 1.42. That's my intermediate-term TREND line, and if it breaks (and sustainably holds below 1.42), there's a heightening probability that we see a 1.36 test by sometime this summer. That would be very USD bullish and will continue to Deflate The Inflation (which will be good for Equities in the end - after prices deflate).
As we look at today’s set up for the S&P 500, the range is 34 points or -0.98% downside to 1259 and 1.69% upside to 1293.
SECTOR AND GLOBAL PERFORMANCE
EQUITY SENTIMENT:
- ADVANCE/DECLINE LINE: +773 (+1093)
- VOLUME: NYSE 1604.51 (+52.53%)
- VIX: 21.85 -3.87% YTD PERFORMANCE: +23.10%
- SPX PUT/CALL RATIO: 2.03 from 1.92 (+5.96%)
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: 22.11
- 3-MONTH T-BILL YIELD: 0.04%
- 10-Year: 2.94 from 2.93
- YIELD CURVE: 2.56 from 2.55
MACRO DATA POINTS:
- 11 a.m.: Export inspections: corn, soybeans, wheat
- 11:30 a.m.: U.S. to sell $27b 3-mo., $24b 6-mo. bills
- 4 p.m.: Weekly crop conditions
WHAT TO WATCH:
- European finance chiefs say further aid for Greece hinged on embattled Prime Minister George Papandreou delivering budget cuts in the face of domestic opposition
- BASF falls as much as 2% in Frankfurt after board member Michael Heinz says he sees demand weakening in China, according to an interview with Finanz und Wirtschaft - June 18.
- Microsoft May Stall Without Strategy Shift: Barron’s
- CBS Shares Not Expensive: Barron’s
- Barron’s says RIM is its worst pick of the year Allstate, Travelers, Chubb Hurt by Tornado Damage: Barron’s
- VF, Timberland a ’Beautiful Fit’: Barron’s
- Blackstone Mulls $1.6bn Northern Rock bid: Observerek
COMMODITY/GROWTH EXPECTATION
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COMMODITY HEADLINES FROM BLOOMBERG:
- Corn Stocks Plunging to 1974 Low as China Adds Brazil-Sized Crop to Demand
- Commodities Tumble to Six-Week Low as Oil Declines on European Debt Crisis
- More Rains Predicted for China Seen Helping Grain Crops After Drought Ends
- Oil Drops to Four-Month Low, Trades Below 200-Day Average on Europe Crisis
- Rubber Declines to Four-Week Low as Oil’s Drop, Greek Crisis Lower Appeal
- Thai Rice-Buying Plan Threatens Shipment Target, Exporters’ Group Says
- Copper in London Resumes Decline on Concern That Greek Crisis May Worsen
- Gold May Advance as Greek Debt Crisis Increases Haven Demand; Silver Gains
- Palm Oil Gains as Exports From Malaysia Climb on Chinese Seasonal Buying
- Copper Cable Shipments From Japan Gain First Month in 3 on Reconstruction
- Soybeans in Chicago Rebound After Touching One-Month Low; Corn May Climb
- Hedge Funds Raise Bets on Heating Oil to Seven-Month High: Energy Markets
- Funds Reduce Long Positions in Commodities in Bet Global Growth to Decline
- Europe Commodity Day Ahead: Corn Stocks Plunging to 1974 Low on China Use
CURRENCIES
EUROPEAN MARKETS
- EUROPE: what a mess; across the board selling of who's next down the most (Italy -2.5%, Finland -2.5%, Spain -1.9% ), were short Spain
ASIAN MARKETS
- ASIA: ugly with selling across the board; India hammered for another -1.8% drop to -14.4% YTD; China (were long) down -0.8% to -6.7% YTD
MIDDLE EAST
Howard Penney
Managing Director