+1.11%
+0.00%Football fans look forward to the start of the season but many find the real excitement begins when the regular season ends and the post-season starts. There have been some interesting games and fans have gotten their moneys worth. However, for the most part, regardless of the playoffs, the ultimate game is usually the Super Bowl. That is the reason why television networks aggressively bid for the event and why advertisers spend millions of dollars on new commercials.
This week investors and traders will have a lot to focus on. The action will be condensed into four days, full of economic and earnings reports, more news out of the euro zone, politics, and the first expiration of options contracts for the 2012. While it might not be the equivalent of the Super Bowl we would consider it equivalent to an exciting playoff game.
Most of the benchmarks that we monitor were higher during the first full week of trading for this New Year, however new concerns about the countries in the euro zone combined with a disappointing earnings report from JP Morgan Chase (JPM—$35.92) to narrow those gains on Friday. News that Standard & Poor’s was considering (and then did) lowering their ratings on some countries debt within the EU created additional concerns after the close and ahead of the opening for markets for this coming week. The concerns may grow as the US markets remain closed for the Martin Luther King Jr. Holiday.
As we were writing, S&P was reducing more debt ratings which could impact the global markets.
Despite the tensions in the Middle East and that crude oil is hovering around the $100/barrel level, energy stocks have been weakening. However we are seeing some leadership in the materials and homebuilding groups, especially following the earnings from Lennar Corp. (LEN—$22.01).
While positive momentum appears to be contracting, we have seen some improvement in the internal market indicators. Risk premiums were slightly lower week/week but the low was set on Tuesday, the lowest level since September. Investor and trader sentiment remains positive but buyers do not seem to be putting their money where their sentiment is.
The broad Nasdaq Composite Index (COMPQ—2,71.67) outperformed the S&P 500 Index (1,289.09) but the Nasdaq 100 Index (NDX—2,371.98) which had been outperforming both during the previous week underperformed both last week. Once again, there is a lack of definitive leadership.
Summary: There are a lot of events that have the potential to move the markets this week. Stocks remain VERY SENSITIVE to news items, especially when it pertains the countries in Europe. We suggest that investors remain defensive and make use of the low risk premiums on options contracts to both create leverage and reduce capital risk, especially in favorable sectors where risk perceptions are low.
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