Recap 1-31-13


Market tops tend to be a process, as the adage goes. Generally, it takes time for bullish consensus to change. During this transition period, weaker data or earnings is usually explained away and broadly ignored. Complacency still reigns. But the momentum of the market slows as consensus views become fully priced in and fewer buyers join in to push up prices.

I think we are starting that process. JPM said today: “Bottom Line: stocks do have to finish lower some days and for now Wed’s action doesn’t seem like anything more than a very mild and boring sell-off.” Meanwhile, in addition to the points I mentioned yesterday, recall that BAML’s fund manager survey for January showed the lowest cash holding in many months, although it is just above the level that triggers the sell signal. It is quite possible that the February figure will official set off the signal. Also, Spain and Italian equity momentum have both stalled. Periphery CDS, and even HY indices, have retraced as well. Again – at this juncture, we are unlikely to see a sudden risk off. But the slowdown in the momentum of various risk assets is a good clue as to how much bullishness has already been priced in.


  • US Jobless Claims jumped to 368k vs 350k exp and 330k prev.
  • Chicago PMI jumped to 55.6 vs 50 exp
  • German Unemployment declined -16k vs +8k exp and +3k prev. This took the rate down to 6.8% vs 6.9% exp and prev

Upcoming Data:

  • Fri: Europe PMI, ItalyUnemployment, US Employment, UMichigan Confidence, ISM
  • Mon: China HSBC Services PMI, RBA
  • Tue: European Services PMI, US ISM Non-Manufacturing
  • Wed: Crude Oil Inventories, Australia Employment
  • Thu: Carney questioned by UK Parliament, BoE, ECB