Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
With the S&P 500 firmly below the April 2012 highs of 1422, and the mood dour any bit of good news – however modest – is prone to offer a bit of a bounce for markets. China delivered that overnight with a contractionary … but less so… flash purchasing managers index report.
- HSBC Corp.’s purchasing managers’ index for manufacturing rose to 49.1 points — a three-month high — from 47.9 points in September on a 100-point scale on which numbers below 50 indicate a contraction.
At this point charts everywhere are broken and it is going to take time to recreate bases from which stocks can deliver any form of sustained gains. That said if you have been following along in 2012 you know almost all the upside has come in the form of overnight gap ups due to interventions or rumors of interventions / policy changes from central authorities. I don’t know what central bankers have left in their bag other than an expansion of QEInfinity that should be coming at the December meeting (to offset Operation Twist running off) and maybe something from China. Of course the ECB plans to help Spain… once Spain asks – which also will be “one of those days” we act surprised and people buy stocks of all sorts in lemming fashion. But in the near term the farther indexes get away from key support (or resistance) the harder they tend to snap. We saw that early last week when a quick and dirty 3 day rally happened. Markets are in a similar oversold condition now. Of course the more bearish situation is to rally modestly to work off the oversold condition which simply sets up for a new round of selling.
Keep in mind we have the FOMC announcement today (no one expects anything) and Apple tomorrow after the bell – the company announced the iPad mini (and a new iPad version) yesterday and it was met with boos and hisses.
As for the indexes the S&P 500 is in no man’s land right here – not down far enough to hit amy key support but quite oversold; it is now firmly below the 50 day moving average. The NASDAQ on the other hand is far more washed out as tech stocks were the leaders down over the past month, and bounced off the 200 day moving average yesterday.
Speaking to China, I would like to point out after being a laggard almost all of 2012 it has performed decently here the past month….
and the U.S. ETF to reflect Chinese shares has shook off this correction very well…
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
