ECB Bank Loans Dull the Pain, but Highlight Depth of Euro Crisis

US stock futures have fallen sharply from pre-market highs and now point to a lower open Wednesday following yesterday’s 3% gain. European stocks had added to yesterday’s gain early this morning after the ECB loaned a record amount of money to the continent’s troubled banks, but the optimism didn’t last long. The loans are evidence that the banking system is in dire straits, and are expected to only have a minimal lasting impact on sentiment.

The ECB loaned a massive $639 billion dollars (489 billion Euros) over three-years to the banks. To put that amount into perspective, one-year loans in June 2009 after the collpase of Lehman Brothers totaled 442 billion Euros. The region was also boosted this morning by news that Norway, insulated from the crisis so far by its gas and oil export-driven economy, would loan $9.3 billion to the IMF to help the most indebted countres avoid default.

Also weighing on the futures this morning was a surprising earnings miss from Oracle (ORCL), which is down 10% pre-market following the report. German rival SAP (SAP) also fell sharply on the news, currently down 5.5% ahead of the open. CarMax (KMX) and Walgreen (WAG) also are set for lower opens after failing to satisfy investors with their earnings reports. In contrast, Nike (NKE) continues its recent strength and is 1.5% higher after exceeding analysts expectations on the top and bottom line.

Yesterday’s action led Investor’s Business Daily put us back in a “Confirmed Rally”. Although it doesn’t always lead to a major bull run, none have started without one! I’m not looking for a massive move, but some follow-through would be encouraging for this broken market.

TECHNICAL TAKE

Next resistance in the SPY is $124.95-125.55, which is an area that could definitely contain any potential rally today. The real Resistance zone is $126.18-126.80.

IF the market starts to probe some of yesterday’s massive move lower, the top third of the move should hold to show dip buying. $122.80-123.23 would be area to look for some support to buy or cover if you decided to start a cheeky short.

The Gap starts at $122, and if we traded back to that level it would be frustrating for the bulls. Let’s see if Santa can stay a little longer.

Disclosures: Scott Redler is long the SPY, GOOG, AAPL, GS, BAC

About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

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