Morning Thoughts June 29

  • Though ended down, market rallied 1.2% last 1 ½ hours of trading – Volumes ok (improved as we rallied) – up +17% DoD and inline with 10day ave – though we felt heavy most day, BETA big outperformer vs. the indices – Cyclical index was up 25bsp….Look at Russell….ended basically flat.
  • PM rally attributed to 2 things 1) Xinhua reported Italy and Spain could get short-term support thru bailout fund to buy new bonds of 2 countries (per unspecified EU spokesperson) and 2) around 3:15pm Merkel canceled a scheduled EU Summit press conference, leading some to believe that there may be progress being made.
  • Banks almost ended flat on the day (XLF flat…BKX index -36bps only) DESPITE 1) NYT article on JPM on $9b deriv loss 2) Citi cutting est on slew of US banks 3) Barclays (BCS) falling 12% on Libor probe headlines and talks CEO may quit (be aware that EU is investigating other banks re LIBOR & also into Euribor)….thought group acted great day-end given all these.
  • The S&Ps are up 40 points since the rally began last night…that’s a big move and I am very happy to not have any overnight risk here.  No one I talk to, and I talk to alot of people, have made mone on a two month basis here having had overnight risk on.
  • I am expecting an active morning today but do not necessarily want to short anything blindly, will need to watch how things play out the first 30 minutes or so.  Thus far I see more short covering still than pure buying.
  • Also remember that today is month and quarter end and next week we have a short week; Tuesday is a half day and Wednesday is off.
  • On the single stock side I see gap fill potential in LULU after weak performance yesterday.  The gap fills 10% lower from here.
  • Nike (NKE) is set to open much lower today and I will be looking to sell some calls into the hole here today.  The stock is set to break a multi-year uptrend at the open today









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