ACA Out Of The Way For Now

Jun.28.12 | About: Technology Select (XLK)

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The Supreme Court surprised many by upholding the new healthcare law but stating the individual mandate is a tax and as such is constitutional. Obama, after the ruling, was celebratory but maintained the individual mandate was not a tax. Clearly this factor will continue to dominate the ongoing political campaign.

With this ruling behind us for now, we need to turn our attention to the eurozone. This morning the WSJ put forth an article stating the Germans had "blinked" by giving credence to ideas that they were flexible on euro bond issues. But this was quickly followed by German Finance Minister Schauble denying this to be true and the story was taken down. So now we proceed to what is advertised as the final eurozone solution for tomorrow in Brussels. Don't bet on this as there will be desperate attempts for more time and this is what we've seen all along. Meanwhile German Consumer Sentiment fell (89.9 vs 90.5).

One thing looming is the problems with JPMorgan's (NYSE:JPM) ever increasing trading losses as they climb to nearly $4-6 billion. Obviously, the bank's credibility is at stake as is Jamie Dimon's oversight.

Another problem is cheating shouldn't pay as the growing Libor scandal shows. For Barclays (NYSE:BCS) its fine was just a slap on the wrist initially but the story has legs.

Wednesday's Durable Goods Report, which was treated as a good report, should be viewed from a longer term perspective. The chart below shows the ongoing decline as represented by our very own Commerce Department.

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Jobless Claims (386K vs 385K expected & prior revised higher to 390K from 387K) allowed for some bullish headlines like" Jobless Claims fall 4000." This silliness has continued for a long time. GDP data was unchanged at 1.9%. The Kansas City Fed Manufacturing Index, like Chicago's Wednesday, fell to 3 vs 9 previously.

Despite the healthcare verdict U.S. stocks sold-off with financials (NYSEARCA:XLF) (NYSEARCA:KBE) and technology (NYSEARCA:XLK) leading the way lower. Hospitals like HCA liked the ruling while other insurers didn't. But a late day rally on an old Bloomberg story that Italy and Spain might get some short-term help launched buy programs late. Another story from the BBC indicates more of the same-some short-term support for Spain and Italy to buy time. But at the end of the story noted how determined Merkel remains. What happened was a 50K block of S&P 500 e-mini futures contracts (or around $3.3B notional equivalent) was enough drive the nominal price index up 1% to close the day-session almost green. So who has that kind of power? Thinking… thinking…

This will be a shorter report with some repetition since Friday may hold more complete information.

Volume rose from Wednesday's abysmally low affair and breadth per the WSJ was mixed.

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The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge." Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

I really shouldn't even be posting today and as you can tell have little to add other than to observe the "fat finger" trade just after the 2:15 PM Buy Program Express left the station. Was that a mistake or are people really thinking the eurozone's problems are solved? The late word from the eurozone is Italy and Spain have a €120 billion aid package put together but neither country is prepared to sign off on it. For example, Italy won't sign until bond buying deal is done and Merkel has already said "nein."

So we shall see how this all plays out perhaps tomorrow or not until Sunday. What we have now is just another short-term fix without any current agreement among the parties. Besides, the short-term fix doesn't address the more serious systemic issues.

Let's see what happens.

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