NY-SP-500 : The never-ending European crisis weighs on the index
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07/24/2012 | 08:12am
Opinion : Check out the trading range breakout 1335 / 1375
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While the SP500 started to show signs of weakness, last week we asked what impact quarterly earnings would have on the U.S. index. At first, investors have focused on the good news from major companies to build a rebound towards 1370 points. The recent statement of Ben Bernanke about a new round of measures supported this trend. However, publications have been mixed and it is once again the news from Europe, especially Spain and Greece, which have been responsible for the downward correction of the index.
Companies as Google and American Express published an increase in their revenue and net income. However, some companies revised their annual forecasts negatively, while others such as Mac Donald's and Coca-Cola already released falling sales. 67% of groups which have already published beat estimates on net income but only 43% did better than expected on revenue. Investors will monitor the results of Apple today but also the release of GDP for the second quarter on Friday which should confirm an economic slowdown (1.4% expected vs.1.9% in the first quarter).
Meanwhile, news from Europe came to stop the bullish trend on the SP500. After Valencia on Friday, there are six other Spanish regions that should ask the Spanish government for financial support. The Spanish ten-year bond yields immediately soared up to 7.56% yesterday. Investors also fear the outcome on the Greek budget situation as members of the Troika visit the country this week.
Technically, the SP500 dynamic is neutral within the range 1335/1375 when looking at daily data. The exit of this range will be decisive. A break below 1335 points should lead the index to the 1280 level. A break above the 1375 level will put the highs of this year in sight.
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Rodolphe Steffan
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