Note: This document has become too lengthy so it is split into two parts as of 9/23/11. To review how the August crash was forecasted this year by Keystone on a technical basis as well as the chronology and timeline for the key market events up thru September, simply type “2011 crash 9-23-11” into the search box and it will come right up. This document now continues from 9/23/11 forward.
Stock Market Crash 2011 Timeline and Chronology Keybot the Quant Market Turns:
Keystone chronicles the broad markets topping and rolling over during 2011, leading into the July-November 2011 crash. The charts and technical’s accurately forecasted the move all year long.
Keystone’s proprietary algorithm, Keybot the Quant, that trades the indexes long-short, using the SPX as a benchmark index, went short on 7/11/11 at SPX 1324 and covered on 8/23/11 at SPX 1146, a 178 handle gain in six weeks time, or 13.4%. The actual trade in SDS gained 25.6%. On 8/23/11, Keybot flips to the long side simultaneously at SPX 1146.
On 9/1/11, Keybot exits the long position at SPX 1207, a 61 handle gain in 8 trading days, or 5.3%. The actual trade in SSO gained 12.1%. On 9/1/11, Keybot flips to the short side simultaneously at SPX 1207.
On 9/8/11, as the indexes compress into a tighter band, Keybot flips to the long side at SPX 1200, a 7 handle gain, but a whipsaw occurs during the session as Chairman Bernanke tanks the markets and Keybot flips back to the short side at SPX 1186 taking a 14 handle loss.
On 9/14/11, on the happy Sarkozy-Merkel-Papandreou conference call euphoria, Keybot exits the short side at SPX 1180 for a 6 handle gain. Keybot flips to the long side simultaneously at SPX 1180.
On 9/22/11, at the open, Keybot exits the long side at SPX 1150 for a 30 handle loss, or 2.5%. Keybot flips to the short side simultaneously at SPX 1150.
On 9/26/11, Keybot closes the short side at SPX 1148 and flips to the long side.
On 9/29/11, Keybot closes the long side at SPX 1146 and flips to the short side.
On 10/6/11, Keybot closes the short side at SPX 1146 and flips to the long side.
On 10/20/11, Keybot closes the long side at SPX 1206 and flips to the short side.
On 10/24/11, Keybot closes the short side at SPX1238 and flips to the long side.
On 11/1/11, Keybot closes the long side at SPX 1233 and flips to the short side.
On 11/8/11, Keybot closes the short side at SPX 1261 and flips to the long side.
On 11/9/11, Keybot closes the long side at SPX1260 and flips to the short side.
On 11/11/11, Keybot closes the short side at SPX 1251 and flips to the long side.
On 11/15/11, Keybot closes the long side at SPX 1247 and flips to the short side.
On……..
Timeline and Chronology of Market Events Leading to the July-November 2011 Stock Market Crash:
August 2010 thru September 2011 is described in the “2011 crash 9-23-11” document. The following continues from late September forward. Skip down to the larger print for last week’s update and the agenda moving forward.
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On 9/25/11, Sunday, G-20 leaders promise action on the European problem before the 11/3/11 meeting in Cannes. The futures are up significantly.
On 9/26/11, Monday, Asia sells off strongly overnight and the futures tumble lower. By the open, however, the markets are moving upwards. Lots of mixed messages coming out of Europe, first the ECB is contemplating rate cuts at the next meeting but then another official dispels that statement. A CNBC news correspondent reports that the EFSF facility will be expanded and well-funded and a solution to the Euro problems is close at hand. The markets shoot upwards like a rocket. The SPX finishes up 27 points, or 2.3%. The Dow Industrials finish up 272 points, or 2.5%.
On 9/26/11, Keybot the Quant algorithm flips to the long side at 11:41 AM EST at SPX 1148. The trade from 9/22/11 is flat. Markets remain highly volatile.
On 9/27/11, Tuesday, Asia markets moves higher on the positive Euro news. Germany’s Merkel takes a more conciliatory stance with Greece stating that they will offer all aid possible. The futures as well as gold and silver are up large on the happy Euro talk as well as EOQ3 window dressing. The Dow Industrials moved up and over 300 points at midday. Major indexes were up huge between 2% and 3%. In the afternoon, the Eurozone members said they want to restructure the Greece bailout terms. Markets immediately started selling off the final hour of trading. The major indexes salvaged about a 1% up day. Gold recovered 4% today.
On 9/28/11, Wednesday, optimism on a Euro solution is fading ahead of the German vote overnight tonight that decides on the funding the EFSF and holds the balance of the markets in its hands. The major indexes finished about 2% lower across the board with the early week euphoria fading away.
On 9/29/11, Thursday, Germany votes in support of the EFSF so the futures move up. The markets start the day up large on better-than-expected GDP and Claims data. Copper, however, continues to collapse, now printing 3.25, a 13-month low. Markets sell off as the day proceeds but then take a large spike upwards in the final minutes. The Dow Industrials cover over a 6% range today, up big, down big, then up big, due to the high volatility (VIX).
On 9/29/11, Keybot the Quant algorithm flips back to the short side at 2:10 PM at SPX 1146. The trade from 9/26/11 is flat. Markets remain highly volatile.
On 9/30/11, Friday, IR cuts sales and profit forecasts. IR is a global bellwether stock, with 40% of its business overseas, a very good proxy for the status of the global economy, and the news is not pretty. The CRB Commodities Index dropped under 300, the first time since November 2010, forecasting the coming deflation. The dollar continues to strengthen. The Eurozone leaders continue to discuss ways, such as using leverage, to increase the EFSF’s available funds to deal with Italy and Spain. Germany’s Finance Minister Schaeuble says using leverage to increase the EFSF is out of the question since that will destroy Germany’s AAA credit rating. Today is the last session in September, the EOM (end of the month) and EOQ3 (end of the third quarter for 2011; Jul-Aug-Sept). The SPX benchmark index fell 14.3% in Q3, the worst quarterly performance since 2008. NYSE announced the circuit breaker levels for the Dow Industrials for Q4 with a first stage halt occurring at a drop of 1100 points, second halt level at a drop of 2250 points and third halt level at a drop of 3350 points, where the exchange would close for the remainder of the day. After the bell, ACI lowers its coal business estimates which will affect the rails as well.
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On 10/2/11, Sunday, the “Occupy Wall Street” protest is now in its 16th day with over 700 people arrested thus far. The group is protesting the growing split between the rich and the poor, the haves and the have-nots, especially in light of the financials and banks causing the housing mess creating three years of suffering thus far. BAC announces a $5 surcharge fee on depositors.
On 10/3/11, Monday, the anecdotal data out of China becomes more worrisome, Chinese factories are going bankrupt. BAC web site slows then shuts down at the noon hour as unhappy depositor’s voice their dislike over the new fees. MS credit default swaps indicate a 35% chance of failure due to their European exposure and the stock sells off 8%. The financials are leading the broad markets lower. The 10-year to 30-year spread drops under 100 basis points, just like summer 2010. WTIC Oil is under $80 and Brent is testing $100. GS drops under 90 just before the close. Gold gains about 40 on the Euro woes. Stocks tumble into the close with the SPX ending down 32 points, or 2.9%. The S&P is now down 19.4% on the verge of confirming a bear market which is generally accepted at a 20% loss. Dow Industrials fall 258 points, or 2.4%.
On 10/4/11, Tuesday, Kospi (Korea) Index tumbles about 8% overnight. Moody warns Dexia, a Franco-Belgium bank stock, of a coming downgrade, prompting France and Belgium to step in stating they will support the bank; shares tumble 25%. Deutshe Bank drops 7% stating it will not meet its profit goals. Moody’s downgrades State Bank of India. The financials around the world are selling off. Greece can now survive until November, not mid-October as originally thought, providing Troika more time to find solutions. GS lowers copper and oil estimates for 2012. GS cuts China’s growth forecasts for 2012. S&P cuts Europe’s growth forecasts for 2012 and indicates a double-dip recession is likely. Copper loses the 3.00 level. Chairman Bernanke gives his testimony and states that the recovery will be weak. The markets sell off at the open. The SPX falls under the 1090 level indicating over a 20% drop from the April top which triggers the technical level of an official bear market.
On 10/4/11, Euro Finance Ministers say they will recapitalize the banks with a coordinated effort. The markets jump on the news and run upwards into the close. The SPX ends the day up recovering from down 20 points, pulling back from the negative 20% bear market level.
On 10/4/11, after the close, Moody’s announces a downgrade of Italy’s debt. Europe announces the formation of a bad bank for Dexia.
On 10/5/11, Wednesday, markets continue along with a recovery rally on optimism that the Eurozone can get its act together.
On 10/5/11, in the evening, Moody’s downgrades the Italian banks. Apple’s Steve Jobs, 56, loses his long battle with cancer. Strikes and protests in Greece ramp up again. The Wall Street protests also grow in size and other protests pop up in major U.S. cities.
On 10/6/11, Thursday, the ECB leaves rates unchanged, no surprise considering it is Trichet’s last meeting. Markets continue a three day short-covering rally.
On 10/6/11, Keybot the Quant algorithm flips back to the long side at 10:21 AM at SPX 1146. The trade from 9/29/11 is flat. Markets remain highly volatile.
On 10/7/11, Friday, Moody’s downgrades 12 U.K. banks. The CRB moves above 300 and the 10-year yield moves over 2% lessening the current deflation risk only slightly. The monthly Jobs Report is better than expected and the market’s rally. Fitch downgrades Italy and Spain debt so the markets sell off on the news.
On 10/7/11, after the close, Moody’s places Belgium’s debt on review for potential downgrade.
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On 10/9/11, Sunday, Merkel and Sarkozy say that a plan to address the Greece default, including handling any potential contagion, will be provided by 11/3/11. Futures markets sky rocket. Global markets rally.
On 10/10/11, Monday, the futures are up large on the Merkel Sarkozy announcement of a plan within 3 ½ weeks. Markets jump at the open and never look back. Keystone’s SPX:VIX Ratio Indicator moves above 35 verifying the huge market up day. The SPX finishes up 39 points, or 3.4%. The Dow Industrials finish up 330 points, or 3%.
On 10/10/11, the Occupy Wall Street movement is gaining steam and the politicians and Wall Street are concerned.
On 10/11/11, Tuesday, Trichet (ECB) says the crisis has become systemic across Europe and there is an increased chance of contagion. Futures indicate a pull back for the markets, but the overall positive effects of “Merkozy” having a plan by the end of the month is keeping markets happy. Slovakia is a hold out and unenthusiastic about supporting the Euro mess but they will eventually vote to approve the enhancements to the EFSF and the markets remain buoyant. AA kicks off the earnings season with lackluster earnings.
On 10/12/11, Wednesday, BOJ (Bank of Japan) sees global markets as unstable and higher risk but markets remain happy on the Merkozy constructive news from Sunday. Harrisburg, Pennsylvania, files for bankruptcy causing new fears over the stability of the muni market. Semiconductors, retail, and as of today financials, are elevating the broad markets. The Dow Industrials turn positive on the year at 11578 but by the close dropped back below. The S&P moved back up over 1200. Markets sold off in the final hour of trading after the FOMC Minutes were released showing that big downside risks remain ahead for the economy.
On 10/13/11, Thursday, China exports continue to fall due to weak U.S. and Europe growth. JPM earnings beat estimates but the financials weaken. Retail sales are better than expected boosting markets. The Occupy Wall Street protests spread to London. S&P downgrades Spain. GOOG releases blow-out earnings that will keep the Q4 tech rally humming.
On 10/14/11, Friday, Fitch downgrades UBS, Royal Bank of Scotland and Lloyds and places other banks such as BAS, GS, MS, Barclay’s, BNP Paribas, Credit Suisse and SocGen on ratings watch negative. G-20 leaders meet in Europe to address how to boost the firepower of the EU, ECB and IMF to save Europe; Spain and Italy remain the key problem. Markets rally into the close ending the week at the highs, the Merkozy announcement on Sunday created the bull buoyancy that lasted all week long. The SPX gained 6% this week, the best week since July 2009. The Dow Industrials is slightly positive for the year after jumping over 9% off the bottom ten trading days ago. Tech is a main driver for the markets with the Nasdaq up 8% this week.
On 10/14/11, Occupy Wall Street movement goes global with the Asia-Pacific area now joining in protests. New York announced that it will send in crews to clean Zuccotti Park where the protestors are assembled saying that protestors will need to leave, but can return, although they would be prohibited from bringing in sleeping bags, tents and so forth. The protestors realize this was an excuse to break them up and clear the area so they stood strong locking arms and awaiting a confrontation. New York flinches announcing that the park cleanup is postponed. The protestors cheer and the festive mood returns. Protestors march towards the stock exchange to test the outer police boundaries but a heavy police presence pushes them back, police horses become frightened due to the protestor’s drums, arrests are made, tension is escalating. New York costs to handle the protestors are increasing. Italian student organize and march on GS’s office in Milan.
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On 10/16/11, Sunday, the G-20 Finance Ministers announce that a plan will be provided within a week’s time. Futures rise overnight as global markets celebrate the happy talk.
On 10/17/11, Monday, Merkel warns against hoping that all of Europe’s debt problems would be resolved and cautions against ‘dreams’ that the situation would be resolved quickly. Futures immediately weaken and turn negative. Big down day with the SPX dropping 24 points, or 1.9%. The Dow Industrials fell 247 points, or 2.1%.
On 10/18/11, Tuesday, China GDP is lower than expected fueling more negativity with global growth forecasts. Copper sells off. Europe lowers expectations for the meetings this weekend. Futures are negative and markets tumble lower after the opening bell. A news release from The Guardian says that Germany and France have agreed to boost the EFSF to $2 trillion euro’s. The markets catapult higher, straight up like a rocket. Analysts poke holes in the $2 trillion euro number, but the day ends with a strong up move. The SPX closes up 25 points, or 2.0%. The Dow Industrials gained 180 points, or 1.6%, retracing Monday’s loss.
On 10/19/11, Wednesday, the anniversary of the 1987 Black Monday crash, Moody’s downgrades Spain for the third time this year. S&P downgrades 24 Italian banks. Market’s rally into the Beige Book release at 2 PM, and then collapse. Europe news says the EU summit meeting on the weekend is in jeopardy. Markets close the day down.
On 10/20/11, Thursday, Brazil cuts rates; the trade wars vibe grows stronger. Colonel Kaddafi, the dethroned Libyan leader, was killed as he fled Sirte. The oil was already coming back on line so the effect of his death to global markets may be minimal although some premium should come out of the oil, gold and silver prices. Greece austerity riots continue each day. Markets sell off after the opening bell on further troubling Europe news concerning the weekend meeting and start to accelerate downwards as lunch time approaches. Merkel says the weekend meeting will definitely occur and solutions are on the way. The markets are at the mercy of the Europe news flow so once again the indexes reverse and run higher. News is also leaked that the Fed may provide further quantitative easing so the markets jump into full buy mode again.
On 10/20/11, Keybot the Quant algorithm flips back to the short side at 10:59 AM at SPX 1206. The trade from 10/6/11 gains about 5%. Markets were saved today, however, by the Fed hinting at further quantitative easing.
On 10/21/11, Friday, Europe says that Merkel and Sarkozy will talk on the phone Saturday night, and meet on Sunday, and also meet on Wednesday. Merkozy down plays the shaky news over the last day and say that a plan is coming. Markets are set for a higher open on Friday. The Fed hinting at further quantitative easing provides a bid under commodities, gold and silver and buoys the equities markets. Keystone’s SPX:VIX Ratio Indicator jumps above 35 indicating a large up day is on tap. The SPX ends up 23 points, or 1.9%, and is up three weeks in a row. The Dow Industrials are up 267 points, or 2.3%, and is up four weeks in a row, and is also now positive on the year again at 11809 compared to the starting year number of 11578.
On 10/21/11, the weekend begins with the markets expecting a firm outline from the EU meeting come Monday morning, then a concrete plan by Wednesday, 10/26/11. Germany and France continue to work out their differences. The problem is that Europe needs a plan that handles the Greece default without creating contagion, and, if contagion occurs, have additional funds available to meet any outcome, while, on the other hand, if an extensive plan is put forth, France may lose its credit rating thereby bringing down the house of cards from a different angle. This is the quandary that France and Germany is dealing with leading to indecision and erratic global markets.
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On 10/23/11, Sunday, snippets of news out of the EU Summit meeting do not affect futures strongly one way or the other. The Occupy Wall Street movement is now gaining in London, Europe, Asia and Australia.
On 10/24/11, Monday, futures gain buoyancy since no bad news has occurred form the EU Summit meeting, the can is kicked down the road until the Wednesday meeting. Positive CAT earnings and guidance keep futures elevated. Markets finish up on the day.
On 10/24/11, Keybot the Quant algorithm flips back to the long side at 9:30 AM at SPX 1238. The trade from 10/20/11 loses 4%.
On 10/25/11, Tuesday, weak MMM and UPS earnings and guidance hurt futures. One of Keystone’s Secular Signals uses UPS, which continues to forecast a secular bear market; shipping is a vital barometer to the overall economy. The markets sell off at the bell, then minutes into trading, the Eurozone Finance Ministers (27 countries) announce that there will be no meeting tomorrow; the markets tank. This is not the actual EU Summit (17 countries) meeting tomorrow but it does suggest a delay in reaching an agreement is occurring. Italy is watched closely by traders with Berlusconi’s comments and behavior hurting the situation with Merkel and Sarkozy. At 10 AM EST, one-half hour into trading, a European official states the Euro FinMin meeting was never firmly planned to take place. The markets took solace in this news and although down, the markets moderate sideways.
On 10/25/11, as trading proceeds, the Consumer Confidence number is 39, a reading in the 30’s! Markets sell off large. The SPX drops 25 points, or 2%. The Dow Industrials fall 207 points, or 1.7%. During the evening, the Dutch Finance Minister downplays the results from the Summit tomorrow blaming the Anglo-Saxon press for fueling all the recent hype and high expectations. He is referencing talk of using a bazooka a la Paulson handling the U.S. crisis in the Fall of 2008.
On 10/26/11, Wednesday, markets await the EU Summit results today. A German vote passes providing Merkel’s marching orders. The Euro leaders begin the Summit but the news flow is limited and no announcement anticipated until after the U.S. markets close today. The broad indexes jump higher after the opening bell but turn around and tumble back to even. As the day a progress, word hits that China will provide help to solve the Europe debt crisis and support the EFSF. Markets catch a bid on this news and move higher during the afternoon into the close with the major indexes up about a percent or more on the day.
On 10/27/11, Thursday, overnight, Europe provides a triple resolution after a 10-hour marathon Summit session. The EFSF lending capacity to be raised to 1 trillion euro’s from 440 billion euro’s. Banks and insurers agree to a 50% loss, or haircut, on their Greek government bonds. Bank recapitalization plans are provided as well; not too large as to hurt the banks, but not too small to disappoint. Trichet says this is a time for “no complacency, hard work now.” The futures jump higher on the euphoric news, the S&P up 20 handles and the Dow Industrials up 160 handles. Details will be needed, however, as to how the EFSF will be leveraged up, how the Greek haircut will take place, and information on the bank recapitalizations. Better than expected GDP data further encourages bulls.
On 10/27/11, at the opening bell, the S&P catapults over 30 handles in the first four minutes. The Dow shoots up over 250 points and the Nasdaq up over 50 handles. The entire session is a wild bull orgy. The SPX closes up 43 points, or 3.4%. The Dow Industrials close up 340 points, or 2.9%. The Nasdaq closes up 88 points, or 3.3%.
On 10/28/11, Friday, China is open to providing 100 billion euro’s to support the expansion of the EFSF. China talks a lot but has yet to place any substantial dough on the table. Italy 10-year bonds moving up towards 6% so the party from yesterday is over. Fitch rating agency says the 50% Greek bond haircut would be a default event. The markets move in a tighter range, now that volatility has dropped significantly over the last day, and close flat. The markets close up for another week, the major indexes are above their starting year numbers and positive for the year now. Bullish euphoria is ruling the day, copper is up over 20% in the last six days, an epic run, and the markets are set to break records for the upside move for the month of October. All this euphoria is built on the euro debt crisis resolution, but, stepping back, there are no details for the plan as yet, and the final-final deadline is next week with the G20 Summit “Kick the Cannes” meeting Thursday, 11/3/11.
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On 10/31/11, Monday, Halloween, EOM, futures are weak as traders await an announcement of a potential bankruptcy of John Corzine’s MF Global. Markets sell off after the opening bell and languish as weak manufacturing data is released. At about 2 PM EST, Prime Minister Papandreou said a referendum will occur concerning the Greek bailout and also a vote of confidence is requested for next week. The markets sold off immediately, tumbling into the close, since the political risk of the European debt problem has now escalated greatly. The SPX lost 32 points, or 2.5%. The Dow Industrials lost 276 points, or 2.3%. MF Global is halted from trading all day long and at the closing bell MF Global declares bankruptcy.
On 11/1/11, Tuesday, China PMI is lowest in nearly three years. South Korea also warns of lower growth. Credit Suisse plans on cutting 1500 additional jobs continuing to scale-back the investment banking business. Futures are down 25 S&P points and almost 200 Dow points. The dollar index $USD moves up to 78. Italy bond yields are climbing showing that there is no faith in the Europe debt plan. The Greece referendum news is causing broad market weakness. Around 1 PM EST, European leaders announce that the Greece referendum may be off the table. Markets jump higher but remain down for the day, then, late in the session, news hits that the Greece referendum is back on the table. Traders are reacting to every news bite and it is obvious that Europe is in disarray. The SPX finishes down 28 points, or 2.2%. The Dow Industrials finish down 236 points, or 2.0%. After the close, BAC scraps its plan for the new $5 monthly debit card fee since outraged customers are exiting the bank. Banks were sold hard today; MS and C down 8%.
On 11/1/11, Keybot the Quant algorithm flips back to the short side at 9:30 AM at SPX 1233. The trade from 10/24/11 is flat.
On 11/2/11, Wednesday, futures are buoyant over a rumor that China will inject billions into the EFSF, and also on the anticipation that Chairman Bernanke will discuss new quantitative easing measures today. Bernanke cuts the GDP outlook from over 3% to under 3% moving forward but talks up the positive side as well.
On 11/2/11, in the evening, a few hundred Occupy Wall Street protestors braved the rain to assemble outside a hotel, blocking the entrance, where Jamie Dimon, CEO of JPM, was speaking. Interestingly, Mr. Dimon expressed sympathy and support for the protestors.
On 11/3/11, Thursday, thousands of Occupy Wall Street protestors in Oakland, California, start a large bonfire in the middle of a downtown street. This action forces the closure of one of the U.S’s busiest ports. The ECB cuts rates by 25 basis points during Draghi’s first meeting taking over the head spot from Trichet. European growth projections are worsening with a recession on the table necessitating the start of rate cuts. The G-20 meeting begins but takes a back seat to the Greece turmoil. News hits that the Greece referendum will be cancelled so the equities markets run to the upside into the close. The SPX closes up 23 points, or 1.8%. The Dow Industrials close up 208 points, or 1.8%.
On 11/4/11, Friday, the Jobs Report is weak as expected although the previous month revisions are much better. Manufacturing and construction jobs are weak. Markets sell off at the open. Italy 10-year yields spike north of 6.35% indicating trouble for Europe and igniting fears of contagion. Markets recover from early losses in the session but the major averages finish off about one-half percent. Traders are waiting on the Greek vote this evening. A no confidence vote would place the bailout in jeopardy and hurt equities markets next week. Italy and Spain are the major contagion worries.
On 11/4/11, the Greek vote is scheduled for midnight Greece time (6 PM EST). Greece will run out of money sometime in December, or sooner, so Greece needs to move quickly. The Fed’s Tarullo says measures are needed to reduce the risks of runs on financial institutions such as 2007 and 2008.
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On 11/7/11, Monday, news wires state that Berlesconi will step down but he responds via his Facebook page that ‘rumors of his dismissal are greatly exaggerated’. Markets like the idea of Berlesconi resigning and bounce at the open. At lunch time, Jurgen Stark, ECB governing council member, says the ‘Eurozone crisis can be brought under control within two years’. The markets ran to the upside on the news and the Dow regains the 12000 level.
On 11/8/11, Tuesday, Italian Prime Minister Silvio Berlusconi promised to resign once a new budget was passed. The markets bounced on the news and the major indexes finished up about one percent.
On 11/8/11, Keybot the Quant algorithm flips back to the long side at 9:30 AM at SPX 1261. The trade from 11/1/11 taking a minor loss.
On 11/8/11, Ohio voted in favor of the unions (teachers, firefighters, police, etc…) and against the Republicans trying to reduce costs. This decision gives unions an upper hand.
On 11/9/11, Wednesday, the Berlusconi rally is history. The day has a peculiar feel especially considering that an asteroid and Comet Elenin are both passing by Earth, several planets are in alignment, the Exercise Pacific Wave tsunami drill is scheduled and the test of the Emergency Alert System (EAS) will occur at 2 PM. Futures are dropping precipitously as Italy bond yields creep upwards. At 4 AM EST, Italy’s 10-year bond yield broke thru 7% and did not look back, ticking off basis points every time you blinked driving higher towards 7.5%. In addition, Italy’s yield curve inverts across the 2’s, 5’s and 10’s; the 2-year briefly moving above 8%. Global markets are pummeled as Europe appears to be spinning out of control. Volatility spikes higher. Italy’s 10-year peaks at 7.83%.
On 11/9/11, Keybot the Quant algorithm flips back to the short side at 9:30 AM at SPX 1260. The trade from 11/8/11 was flat. The whipsaw for the algo is testimony to the current jumpiness and highly volatile markets in play.
On 11/9/11, at 2 PM, coincidentally with the EAS test, the markets roll over for another leg down. The financial sector broke support and took the broad markets lower. Keystone’s SPX:VIX Ratio Indicator dropped under 35 verifying today’s selling event and locking in the day’s fate. The blood bath today finished with the SPX down 47 points, or 3.7%, turning negative on the year again. The Dow Industrials finished down 389 points, or 3.2%, but remains positive on the year. The Nasdaq dropped 106 points, or 3.9%.
On 11/9/11, Jefferson County, Alabama, home of Birmingham, filed the largest U.S. municipal bankruptcy in history from sewer bond troubles. A major creditor is JPM. This creates new worries for the $3.7 trillion dollar muni bond market.
On 11/10/11, Thursday, China’s trade surplus widened as the nation’s export destinations continue to show lower demand. The slowdown is appearing from other countries around the globe in addition to Europe, such as Canada. Italy’s 10-year bond yield drops back below 7% returning calm to equities markets. After four days of drama, banker Lucas Papademos is named the Greek Prime Minister, taking Papandreou’s place. The more positive news from Europe buoys markets. Keystone’s SPX:VIX Ratio Indicator moves above 35 indicating that a large up day is on tap and a rally is in progress.
On 11/11/11, Friday, markets continue to react positively to more encouraging news from Greece and a growing optimism that Italy will avoid fiscal calamity. The futures are up large overnight and the markets gap up at the open. The week ends with the major indexes moving up 3% over the last two days. Gold remains buoyant. Oil is at highest price since July. Despite the strong markets today, volume was very light and AAPL finished down.
On 11/11/11, Keybot the Quant algorithm flips back to the long side at 9:30 AM at SPX 1251. The trade from 11/9/11 gains 9 handles. The whipsaws for the algo are unprecedented and highlight the intense, highly volatile bull-bear battle now occurring.
On 11/12/11, Saturday evening, Berlusconi resigns. Much of Italy celebrates his departure. Mario Monti takes over.
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On 11/14/11, Monday, Europe was higher reacting positively to Berlusconi’s departure. Music fills the plaza’s but many worry that Mario Monti will not be able to fix the mess in time. President Obama attended the Asia-Pacific economic Cooperation (APEC) summit and comments that “Enough is enough,” and “China needs to act like a grown-up economy. Do not take advantage of U.S. businesses.” This rhetoric will only increase tensions and promotes future trade wars. The Spanish 10-year moves above 6% indicating that European contagion is worsening. The day ends with markets slightly lower.
On 11/15/11, Tuesday in the early morning hours between 1 and 4 AM EST, New York City police evict the Occupy Wall Street protestors from Zuccotti Park, taking advantage of the early hours when protestors are sleepy to avoid violence. Police cite health, fire and safety reasons for the eviction but the protestors were planning a major move on Wall Street in two days to celebrate the two-month anniversary of the movement, so the police took pre-emptive action. Police say that protestors are allowed to return but sleeping bags or tents are not permitted. About 70 arrests, perhaps as many as 150, occurred. Italy 10-year yields move above 7% again and Spain 10-year yields are well above 6% at 6.33%, fueling contagion fears. Futures steadily deteriorate as Italy struggles to form a new government.
On 11/15/11, markets trend lower into lunch time. Mario Monti announces that he is making strong progress with forming Italy’s new government. The markets perform a rocket launch to the upside on the news erasing the day’s losses and moving well into the green.
On 11/15/11, Keybot the Quant algorithm flips back to the short side at 11:27 AM at SPX 1247. The trade from 11/11/11 is flat. Markets remain very unstable.
On 11/16/11, Wednesday, markets are weak as Euro worries persist and Italy’s Unicredit seeks funding from the ECB. BOE warns of slower growth ahead. Oil tops 100, then 101, then 102. Gold sells off now moving in sync with equities. Stocks recover as the day moves along but during the last half hour of trading, Fitch rating agency announces that the U.S. banks face ‘serious risk’ unless the European debt crisis resolves in a ‘timely and orderly manner’. The three banks most exposed to the Eurozone troubles are JPM, BAC and C. Further losses in confidence in these banks will provide a catalyst for the globe to spin out of control. Stocks tumble with the SPX closing down 21 points, or 1.7%. The Dow Industrials lost 191 points, or 1.6%. The Nasdaq led the downside, which is not a good sign, down 47 points, or 1.7%.
On 11/17/11, Thursday, the day begins with a strong focus on Europe 10-year yields. Spain hits a record high not seen since June 1997. France and German 10-year spread exceeds 2% indicating contagion worries are increasing. France 10-year yield is 3.75%, Spain 6.60% and Italy staying above 7% at 7.05%. The formation of new governments in Greece and Italy continue while elections in Spain are on tap. France and Spain hold a substantial amount of Italy’s debt which fuels the contagion.
On 11/17/11, the U.S. markets are weak and at noon the semiconductor sector collapses, dropping the major indexes. Keystone’s SPX:VIX Ratio Indicator drops under 35 indicating a large down day on tap. The markets tumble but moderate into the close with the SPX down 21 points, or 1.7%, now printing two back-to-back days of losses over 1.5%. The Dow Industrials fell 135 points, or 1.1%. The Nasdaq, that led the slide lower with weak semi’s and tech today, finished down 52 points, or 2%.
On 11/18/11, Friday, ECB’s new head, Draghi, says ‘we must work together with emerging economies’, no doubt hoping for rich Uncle China to send some dough. The ECB is buying Italy’s and Spain’s bonds today keeping the Italy 10-year yield under 7% and helping the euro get a lift. Worries surface that the ECB may have a cap on their bond buying and that their actions may end up causing more harm than good. Germany’s major worry continues to be inflation since the 1921-1924 Weimar Republic hangs overhead. Many now jokingly refer to the European debt crisis as “..having a German Pope and an Italian Central Banker.”
On 11/18/11, China property prices in 70 cities dropped for the first time this year—the bubble is popping. The U.S. housing bubble popped July 2005 and remains in a funk six years later. Bini Smaghi warns that Italy faces a ‘traumatic wake-up call’. The markets languish sideways all day and close flat. For the week, the SPX lost almost 50 points, about 3.8%. The Dow Industrials lost 358 points or 2.9%. The Nasdaq lost 106 points this week, 4.0%; the breakdown in semiconductors and tech stocks notable.
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On 11/20/11, Sunday, the news is grim concerning the super committee and U.S. budget talks. The super committee must come to an agreement by midnight Monday night so the Budget office can score the proposal ahead of the Wednesday deadline. Antonis Samaras, one of the leaders of the Greece coalition, refuses to sign oath concerning austerity measures. Spain conducts an election today as their debt fears grow out of control. Egypt erupts with violence. A holiday shortened week of trading is ahead with lower volume trading expected.
On 11/21/11, Monday, markets tumble at the open; futures were weak overnight due to the looming super committee failure. The SPX falls under 1200 for the first time since 10/20/11. Moody’s warns of a potential France downgrade which weakens markets more. The missing MF Global funds and freezing of assets has traders on edge. Democratic Senator Max Baucus provides positive hope concerning the super committee action so the markets bounce. The failure of the super committee, however, is inevitable so the markets sell off again into the close. Keystone’s SPX:VIXRatio Indicator drops under 35 indicating a large down day on tap. The SPX falls 23 points, or 1.9%. The Dow Industrials fell 248 points, or 2.1 %. The Nasdaq fell 49 points, or 1.9%. Gold dropped over 40. Copper was down over 3% at one point today.
On 11/21/11, in the evening, the S&P says the super committee failure will not affect the U.S. credit rating. This helps buoy global markets overnight.
On 11/22/11, Tuesday, Merkel says there is “no new bazooka” to help solve the Europe crisis and downplays the use of a new Eurobond, reinforcing the stern German position. U.S. money funds are reducing European bank exposure to the lowest levels on record, reducing risk and even seeking collateral for loans. Spain has to pay the highest interest rates not seen in 14 years for their auctions; European bonds continue moving up in yield. GS says “there is a lack of initiative to settle the European crisis.” Futures are buoyant but once GDP is released showing a 2.0% number compared to the prior estimate at 2.5%, markets sell off. At noon, the IMF announces a new program, the Country Bailout Fund, and the euro bounces with equities markets recovering from losses. Markets deflate when traders realize the new plan is more bluster than substance and end down on the day. The Fed announces plans for new stress tests for the 31 largest banks. The Libor 3-month London interbank rate continues to climb indicating trouble ahead for global markets.
On 11/23/11, Wednesday, futures are down large overnight. China PMI is weak and the signs of a slowdown in China are growing. A mining tax on coal and iron ore in Australia slaps the miners. Germany says nien to Eurobonds. Germany fails to get bids for 35% of the bonds offered at auction, casting a wet blanket over the markets. Germany’s 10-year is now at 2.03% increasing by 10 basis points in the last 24 hours. France 10-year is up to 3.61%. Italy’s yield curve is inverted between the 2-year and 10-year yields indicating that Italy is now in recession. Deutsche Bank continues to surface in conversations as a troubled bank. The euro pop late yesterday due to the IMF announcement is gone with the euro headed lower.
On 11/23/11, the markets are weak from start to finish. Keystone’s SPX:VIX Ratio Indicator falls under 35 indicating a large down day will occur today. Keystone’s SPXA150R Indicator shows the bears have regained control of the markets. The utilities sector weakens which was the last pillar of strength remaining for the broad markets. Traders lighten up on stocks into the close since the globe will be trading tomorrow while the U.S. enjoys a turkey drumstick, or two. Before the close, Germany walks back the statement about being against Eurobonds earlier in the day. Markets become buoyant. The SPX closes down for the sixth day in a row, losing 26 points today, or 2.2%. The Dow Industrials closed down 236 points, or 2.1%. The Nasdaq lost 61 points, or 2.4%, leading the way down, contrary to the expected seasonality rise in technology that typically occurs in Q4. Judge Mary France rules that Harrisburg, Pennsylvania, may not seek bankruptcy protection.
On 11/24/11, Thursday, Thanksgiving holiday, S&P warns about a potential Japan downgrade. Germany 10-year yields continue upwards, now at 2.23%, a 30 basis point rise this week. Germany is against the Eurobond concept since it wants the other countries to develop a responsible fiscal plan first. The countries in need of funds simply want Germany to step in to save the day. Eurobonds seem inevitable so the countries in trouble need to get busy with their fiscal plans. Meanwhile, time is running out, tension is growing, and France is in danger of receiving a downgrade which will turn the mess upside down.
On 11/24/11, Fitch rating agency downgrades Portugal to junk status. Dexia Bank is using the emergency funding facility. U.S. traders enjoy Thanksgiving Day, keeping one eye on the turkey and one eye on the European markets. Hungary receives a downgrade.
On 11/25/11, Friday, the U.S. markets prepare for a shortened holiday session. Today is dubbed Black Friday since it is one of the busiest shopping days of the year, kicking off the holiday season. The moniker Black Friday means that retail stores typically go into the black becoming profitable, some stores receive as much as 80% of their yearly sales during the holiday season. Markets bounce strongly after the open but lose steam as the session moves along. Europe markets are weak as Italy 2-year yields briefly move over 8% and the Italy 2-10 yield curve is now clearly inverted indicating recession. The European news continues to deteriorate. For this holiday-shortened week of trading, the SPX lost 4.7%, The Dow lost 4.8% and the Nasdaq lost 5.1%. The dollar jumped 2.1% this week. Gold lost 41 bucks, 2.4%, this week.
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On 11/27/11, Sunday,
……………………the saga continues…………..
Looking ahead to next week, watch European bond market!
Eurozone problems continue. Italy and Spain remain the big worries. Watch Italy, Spain, France, Germany and U.S. 10-year yields to gauge the growing contagion. Watch the 2-10 yield spreads for yield curve inversions signaling recessions. Global recovery is stalling. China bubble popping. Copper and commodities languish. All major sectors are in the bearish camp except for utilities.
On 11/28/11, New Home Sales
On 11/29/11, Consumer Confidence
On 11/30/11, EOM, Pending Home Sales and Beige Book.
On 12/1/11, Jobless Claims and ISM manufacturing Index—watch the energy sector closely
On 12/2/11, Jobs Report
On 12/8/11, ECB rate decision and conference
On 12/9/11, Europe Summit; positive news must be delivered
On 12/13/11, FOMC rate decision meeting
On 12/23/11, Congress debt vote date but all this is moot with the super committee failure
On 12/30/11, EOM, EOQ4, EOY2011. Start of trading for the New Year 2012 begins on Tuesday, 1/3/12
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