STTG Market Recap Sep 20, 2012

Thursday was the kind of session that would have bears up in arms.  Quite poor economic data from across the globe, along with an earnings warning from railroad operator Northern Southern (NSC) put pressure on markets at the start of the day, but hour by hour stocks inched back and by the end of the day losses were muted.  Hence, if stocks cannot stay down after such bad news, these folk have to wonder what it will take.  The S&P 500 fell by 0.05% and the NASDAQ 0.2%.  That said it is not all unicorns and butterflies out there; there continues to be serious weakness in the (obviously) transports, semiconductors, and oil continues to act weak, although it might be short term oversold.

Indeed today was a day for history, BespokeInvest tweeted mid afternoon that today was only the 5th time in 50 years that (at that moment in time) the Dow Transports were down 3% while the DJIA was up! (the transports rallied a bit late in the session to cut losses to less than 3% but the massive divergence remains)



Oil is down ~7% for the week.


After the bell, software giant Oracle (ORCL) reported and while they matched earning estimates – revenue came in 2% light.  So the larger question is have earnings expectations come in enough or can we expect more preannouncements as we have seen from a bevy of companies from FedEx (FDX) to Intel (INTC) the last few weeks.

Looking at the indexes we see the S&P 500 now on its sixth close above the multi month ascending channel; if this persists it could indicate the start of an accelerated trend with a higher slope – something to watch.  More importantly last Thursday’s breakout has been held intact despite today’s gap down.  Holding the top 1/3rd to 1/2th of that gap would indicate a very strong trend and a 50% retrace was roughly what happened at the worst levels today.


The NASDAQ still remains in bullish posture as well:


Both European and Chinese purchasing managers indexes remained weak, and in contractionary mode:

  • The euro zone’s purchasing managers’ index fell to 45.9 in September from 46.3 in August, according to data-services firm Markit, well below economists’ forecasts. Index readings below 50 signal contraction in business output.  Activity in the euro zone shows no such sign of bottoming. GDP fell 0.7%, at an annualized rate, in the second quarter and hasn’t expanded since the third quarter of last year. PMI figures over the summer suggest the contraction deepened this quarter to as much as 2% annualized, economists said
  • China’s PMI rose slightly to 47.8 from August’s final reading of 47.6, but the index has been in contraction territory for 11 straight months.

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