European Closing Thoughts 19/07/12

The news:

“Applications for jobless benefits increased by 34,000 to 386,000 in the week ended July 14, Labor Department figures showed today. Economists forecast 365,000 claims, according to the median estimate in a Bloomberg News survey.”

We need to point out that a reduction in the number of auto-plant layoffs typical of this part of the year has thrown the Labor Department's seasonal adjustment process out of the line.

Estimates for first-time claims ranged from 350,000 to 390,000 in the Bloomberg News survey of 47 economists. The Labor Department initially reported the prior week's applications at 350,000.

On the earnings side:

Nokia Corp. reported that losses widened in the second quarter as sales fell 19% against the year-ago period. The company posted a loss of 38 cents per share against a loss of €0.10 per share in the year-ago period. On an adjusted basis, it lost €0.08 per share, versus a profit of €0.06 per share. Net losses totaled €1.4 billion in the second quarter against losses of €492 million in the year-ago period. Sales for the group fell to €7.54 billion against €9.28 billion in the year-ago period. The stock is up 12.62% to Eur 1.54 on the CEO remarks about the Lumia handset's future and company restructuring program.

IBM is up 3.86% to $195.52, after the company raised its full-year earnings per share target. IBM reported a second-quarter profit of $3.88 billion, or $3.34 a share, compared with a profit of $3.66 billion, or $3 a share, for the year-earlier period. Revenue was $25.8 billion, down from $26.7 billion. Adjusted operating profit was $3.51 a share. Analysts were expecting the company to report a profit of $3.43 a share, on revenue of $26.3 billion, according to FactSet. IBM raised its full-year operating earnings outlook to “at least $15.10” a share.

The market place:

Gold higher 1.09% to 1,587.90$, Oil(Wti) up 2.27% to 91.91$, the Eur/$ cross fell 0.19% to 1.2260$, Stoxx50 closed higher 0.67% to 2,300.06, German Dax 0.99% higher to 6,750.59.

I suppose many of you are a bit surprised by today price action, if you are trying to figured out today move I will give you a hint. Tomorrow it's expiry date, therefore stocks as well as indexes were heading towards their pin. The pin risk represent the strike with the highest open interest, the day before the expiry usually stocks will move towards their pin driven by the “power of gamma”.

Do you want the validation of the hypothesis?

Just look at the closing price of the major indexes and you will see that they are all at a strike price except for fraction like 300 for the Stoxx50, 750 for the German Dax.

Have a pleasant evening.

Originally posted at www.77sigmatrading.com