On Friday, 5/17/13, a
large X-class solar flare erupts and
the most active sunspot the last several days is now aligning with the Earth. European
auto sales slightly improve mainly due to U.K. sales. Fiat reports weak
sales. Euro-area
construction data is weaker than expected. Today is OpEx. The shamed IRS head Miller is grilled by politicians concerning the IRS
scandal. Bullish traders cast away the QE tapering remarks from yesterday since
the Fed will more likely continue QE indefinitely moving forward. MS
says the S&P 500 will reach 1750 this year. The S&P futures are up
six.
The markets open and move higher. The dollar/yen moves above 103+ creating the bull fuel (weaker yen due to
BOJ pumping). Volatility collapses lower
creating further market upside. Consumer Sentiment is better than expected adding rocket
fuel. The broad indexes
travel flat for much of the day after the initial push higher and then at 2
PM Fed’s
Kocherlakota says “the Fed has not lowered interest rates enough” and is
stating the case for more QE. A buying frenzy occurs creating a melt-up into the closing bell.
Shorts are throwing in the towel adding more bull fuel along with the volume
push for OpEx. New all-time highs
are printed again in the Dow, SPX; Trannies, and RUT (Nasdaq remains
far below the dotcom bubble top). The SPX closes at a new all-time intraday and closing high at
1667.47. The indexes have
gone near-parabolic over the last four weeks. The Fed and BOJ central bankers are pumping
equity markets higher day after day and ‘the Fed is the market’. Stocks
remain ovebot and signals indicate topping action but the central bankers are
overpowering market fundamentals and technicals. For
the week, the RUT is up +2.2%, SPX +2.1%, Nasdaq +1.8% and Dow +1.6%. XLI (industrials
sector) outperformed to the upside at +2.3%. Gold drops over 100 in the last seven
days closing at 1358. The NYSE cancels trades in APC in the final
minute as a mini flash crash occurs taking the stock from the 90’s down to 20
in a heartbeat. The computer
glitches and software malfunctions in the exchanges continue to occur with
regularity. The BPSPX, SPXA150R, CPC and CPCE put/call
numbers, CRB Rind Index, and other market signals indicate a significant market
top is at hand but the Fed and BOJ money printing continues to distort price
discovery.
On Saturday, 5/18/13,
the U.S.
Treasury begins measures to extend the 16.4 trillion debt ceiling limit.
The government is taking in more revenue
than expected, the deficit is lower and the sequester cuts are in place, all
helping Secretary Lew to extend the Debt Ceiling
deadline to after Labor Day into September.
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On Sunday, 5/19/13,
North Korea launches four short-range missiles. YHOO buys the blogging site Tumbler.
On Monday, 5/20/13,
Japan voices
concern over the drastic drop in the yen
(that they created) so the yen
strengthens with dollar/yen moving from over 103 on Friday to 102.59. Japan upgrades its assessment on the
economy and the Nikkei moves higher
despite the stronger yen. China real estate
prices continue to overheat. Copper
and commodities are sold off. Silver drops 4%. European indexes continue to print new all-time highs.
DAX is up one-half percent to 8440. The
FTSE closes
at the highest level since 2000. The U.S. broad indexes are flat to
higher with the SPX printing another new all-time high at 1672.84 but the all-time closing high from Friday at 1667.47
remains in place. Fed heads Fisher and
Evans say the economy is improving and that tapering of QE may occur but
traders are hooked on the QE crack cocaine and simply take markets higher
ignoring the Fed comments. Stocks fade in the last hour of trading and close flat on the day overall. Gold
and silver as well as commodities in general stage a dramatic comeback. Silver
was down over 7% in the morning and ends up 3%. Lumber
is down over -22% since March, less than 8 weeks ago, contrary to what
is expected for a robust housing recovery that analysts tout daily.
On Tuesday, 5/21/13,
CCL lowers sales forecasts as the cruise ship industry weakens. HD earnings beat on top and bottom lines verifying
a strong housing recovery; the stock climbs +5% pre-market and sets a happy
tone for markets. BBY earnings miss and
drops -2%. GS says the SPX will reach
1750 this year, 1900 in 2014 and 2100 in 2015. MS called for 1750 last Friday
morning which created market bullishness. A JPM shareholder vote backs Jamie
Dimon deciding to not split the leadership role and the stock jumps 1.5%. AAPL’s Cook is grilled by Congress over its
tax accounting and tax havens. The SPX
covers a range of 1663-1675 today and threatens a break down in the morning at
SPX 1663 but Fed’s Bullard says he is agreeable to
continued QE so the markets recover and catapult higher. Markets
drift along sideways until the afternoon when Fed’s Dudley also says he is agreeable to
more QE providing another market up thrust with the SPX printing another new all-time high
at 1674.93 and new all-time closing high at 1669.16. The Dow prints a
new all-time high at 15434.50 and new all-time closing high at 15387.58.
The Fed
is the market.
On Wednesday, 5/22/13,
BOJ will ‘carefully watch JGB bond yields’ and
maintain flexibility with purchases as necessary. Kuroda believes yields will be underpinned
and that the recent spike higher in yields is not impacting the economy.
The dollar/yen
moves higher to 102.81 and U.S. futures rise. Asian stocks are near 5-year highs. U.K.
retail sales are worse than expected. MSFT
unveils new Xbox. Syria turmoil continues as the ongoing
civil war broadens out and threatens the entire Middle East. Fed’s Dudley,
a mouth piece for Bernanke, says it will take 3 or 4 months for a decision on
whether to taper, or even ‘dial-up’ QE. TOL beats on earnings verifying a housing
recovery but lumber prices and
Mortgage Applications (the lowest in many months) say the housing recovery is
out of gas. TGT reports lackluster earnings
which is a surprise considering the retail sector strength this year. The markets open and move higher. Chairman Bernanke testifies in front of Congress and
repeats strong dovishness and continued QE.
The equity markets catapult higher with new all-time highs
printing in the major indexes. The RUT moves above 1000. The Fed is the markets. Lois Lerner, at
the center of the IRS scandal, pleads the Fifth Amendment and refuses to
testify. Congress dismisses the witness so the IRS scandal drama grows. The SPX runs higher through 1686. Bernanke is
asked about tapering and he says a decision can be made in the weeks ahead (not
months) and he would not rule out a slowdown in QE before Labor Day. The Fed is the markets
so these less dovish comments cause a sell off.
Markets drift lower into the FOMC Minutes
which add further confusion to the Fed’s game plan. The mixed signals from the Fed send markets
lower into the close as algorithmic sell programs kick-in. Volatility jumps higher and copper sells off creating market
negativity. The broad indexes
print an outside reversal day where the indexes print higher highs and then
finish at lower lows than Tuesday typically signaling a trend change in the
markets. The SPX
ends the day down 14 points at 1655, -0.8%, after printing over 1687 this
morning. The intraday negative
point swing is about 38 S&P’s. The Dow ends the day down 80 points at 15307,
-0.5%, after printing over 15542 this morning. The intraday point
swing is -277 points. The Nasdaq is down -1.1%
to 3463. The RUT is down -1.7%
to 982. Clearly, tech and small caps are leading the way
lower, on strong volume, a negative sign for markets moving forward. Traders
are shocked to see that markets can actually go down instead of up day after
day on Fed and BOJ crack cocaine. The 10-year
Treasury yield jumps to 2.03% and higher. Dollar/yen
103.14. Euro 1.2836. WTIC crude oil
93.96. Brent oil 102.32. After the bell, HPQ beats on earnings but top line
revenue is weaker than expected and guidance is weak for China. The stock jumps
over 10% AH’s and sets a happy tone for the tech sector.
On Thursday, 5/23/13,
F announces closure of auto manufacturing plants in Australia ending a 90-year
history. Interestingly, the ramp up of Ford production in the U.S. announced
yesterday, which excited traders, actually results in F reducing global
production overall after today’s announcement.
The U.S.
negativity hits Japan. The 10-year JGB
(Japan bonds) yield tops 1% (highest in one year) creating a one
billion dollar headache for Japan in a heartbeat. Yield then drops to 0.86% a few hours later. The worry in JGB’s causes the dollar/yen to drop under 101
from a high of 103.74 only a few hours ago (stronger yen). The Nikkei market crashes -7.3% to 14484 and the Topix drops
-6.9%, the most since the
tragic earthquake in March 2011.
The HSBC
China PMI.surprises to the downside showing contraction (a drop under 50) and a
shrinking manufacturing sector in Asia.
Copper and commodities sell off. Crude
oil drops to 92.97. Asian markets sell
off on the triple whammy of the U.S. market weakness, trouble in Japan JGB’s
and now confirmation of a more serious China slowdown. More fuel to the negative global fire is
added by weak
European PMI’s. Germany
manufacturing data is slightly better than expected but remains under 50
showing continued contraction overall. European
automobile stocks are sold off about -5%.
European markets sell off from 2 to 3%. Spanish bonds decline
for the first time in over a week (yields up). GOOG is grilled in the U.K. over
using the tax system to their advantage like AAPL was grilled in the States,
but both companies simply state that they are following the rules laid out by
lawmakers. Global
tensions are high as a potential cascading market event may be underway.
Negativity moves from the U.S. to Japan, China and Asia, then to Europe, and
now back to the U.S. with S&P futures down over 20 points at 6 AM EST. Jobless Claims improve slightly. New Home Sales show a continuing recovery
in the housing sector. Markets drop
like a stone at the opening bell; the SPX prints a LOD at 1636. A Flash Crash
occurs in the utilities sector with AEP and
NEE dropping over -50% in a heartbeat. The UTIL
utility index collapses over -12%. A data feed problem is blamed and the stocks and
index recover. In a surprising announcement, the stock exchange decides to keep
all orders in place despite the huge drops, burning any trader that had a
market sell order in place. These traders lost 50% of their money in AEP and NEE
in minutes. Aunt Martha worries over her perceived safe haven utility stocks. Flash
crashes continue to occur with frequency and another big one a la 5/6/10 is
on the table moving forward. The broad indexes place a bottom in the
first half hour of trading and move higher all day long to end flat on the day.
Long traders are relieved that the markets did not cascade lower considering
the bad news out of Asia and Europe overnight.
The SPX finishes the day at 1650.
On the ongoing
unraveling IRS scandal, Lois Lerner is placed on administrative leave with pay.
Congress is considering recalling Lerner next week since her pleading the Fifth
Amendment may have been nullified by her statement of innocence before she
refused to answer any questions. ECB’s
Draghi speaks at a dinner engagement and says his bond-buying pledge is helping European markets.
On Friday, 5/24/13, Aussie banks sell off the most in one year’s time. BOJ’s Kuroda
says sufficient monetary easing has taken place and that he has not set targets
for the yen or the Nikkei Index. The yen strengthens with the dollar/yen dropping to 101.57 overnight. The Nikkei
drops at the opening bell but recovers as the session plays out. Volatility
jumps nearly 60%! Germany’s Weidmann
expresses skepticism over whether the BOJ’s actions will be successful. Markets
are becoming increasingly concerned over the Fed and BOJ exit strategies. GS says that Kuroda may not actually fully
understand the implications of his policies. German
GDP data is lackluster reflecting the weakness in Europe. German trade data disappoints as well but IFO
confidence is far above expectations. Global markets remain very
jumpy. U.S. futures were up, then went
negative at 3:30 AM EST, then up again, then start to deteriorate again at 5 AM
EST. Crude oil drops under 94. The 10-year yield is 2.01%. The rock-steady retail sector is weak after
disappointing ANF earnings. Durable Goods
Orders are better than expected especially with defense spending which
is surprising due to the sequester cuts. Futures recover. Markets place a
low in the 10 AM time frame, as usual each day, and then the Fed pump carries
markets higher into the closing bell. Dollar/yen drops under 101 but recovers.
Volatility remains elevated and copper is weak. Volume is at the lowest level since the Christmas and New Year’s
holidays so the markets throw off mixed signals. Both the SPX and VIX move
lower today. The CPC put/call jumps to
1.26, the highest level since the May 2012 sell off, indicating that traders
are buying downside protection. This
fear may create a market bounce next
week. The NYMO prints a low number also hinting that a recovery bounce may be on
tap next week. Markets are typically
buoyant In front of the three-day holiday weekend and full moon which plays out
as expected. A lunar eclipse occurs. The
SPX finishes at the highs at the
important 1649-1650 S/R level. For the week, the SPX is down -1.1%, the Dow -0.3%, Nasdaq
-1.1% and RUT -1.2%, so tech and small caps lead the way lower with the SPX. The
down week breaks the 4-week parabolic up
streak for the indexes. Bidders such as YHOO are tripping over themselves
to buy Hulu, the popular video service.
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On Monday, 5/27/13, U.S. Markets are Closed in Observance of Memorial Day.
On Tuesday, 5/28/13, U.S. Markets Open for Trading. Consumer Confidence.
Fed Mfg data. 2-Year Note Auction.
On Wednesday, 5/29/13,
5-Year Note Auction.
On Thursday, 5/30/13,
Jobless Claims. GDP. 7-Year Note
Auction.
On Friday, 5/31/13, EOM. Personal
Income and Outlays. Chicago PMI. Consumer Sentiment. Farm Prices.
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On Monday, 6/3/13, HSBC China PMI. European
PMI’s. PMI Mfg Index. ISM Mfg Index. Construction
Spending.
On Tuesday, 6/4/13,
International Trade.
On Wednesday, 6/5/13,
ADP Employment Report. Productivity
and Costs. Factory Orders. ISM Non-Mfg Index. Beige Book.
On Thursday, 6/6/13,
Jobless Claims.
On Friday, 6/7/13, Monthly Jobs Report.
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In September, the Debt Ceiling limit is reached along with the CR
resolution to fund the U.S. government. Can the politicians reach an agreement this
summer to set the U.S. on the correct fiscal path forward to avoid these
deadlines? The summer showdown is similar to the set-up in the summer of
2011 which did not end happily for markets.
In September, Merkel (Germany) seeks re-election and will not want to see Greece or other nations exit
the euro before the election but will not care afterwards. Perhaps Greece and
others, or Germany, may exit the euro in the future.
In Q4 2013, European bank stress tests will occur.
On Friday, 1/31/14,
Chairman
Bernanke’s term ends at the Fed, unless there is news during Q4 2013
that he will stay on. Will Yellen, even
more dovish and likely wanting to see QE on steroids, take the reins?
In March 2014, the
ESM is
officially “fully operational.” The banking union schedule has been delayed from January 2013 to January
2014 and now to March 2014.
