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, Belgium is downgraded a notch. News reports say the IMF is in financing talks with Italy. Futures markets catapult higher on the news.
On 11/28/11, Monday, IMF denies that financing talks are occurring with Italy but the futures markets have only ticked higher. Italy 10-year bond is at 7.08% remaining above 7% despite the happy talk. Germany is considering ‘elite bonds’ or ‘AAA bonds’ which may provide a solution agreeable in lieu of the common euro bond idea. Markets leap higher at the opening bell. Keystone’s SPX:VIX Ratio Indicator moves above 35 indicating a large up day on tap. The day ends with the SPX up 34 points, or 2.9%. The Dow Industrials gained 291 points, or 2.6%, and was well up over 300 points higher during the session. The Nasdaq was up 86 points, or 3.5%, the leader on the day.
On 11/28/11, Keybot the Quant algorithm flips back to the long side at 9:52 AM at SPX 1194. The short trade from 11/15/11 is a 4% gain. Markets remain very unstable.
On 11/28/11, in the evening, Fitch affirms AAA rating on U.S. debt but issues a negative outlook moving forward because of the super committee failure. Fitch stresses the need for the U.S. to get its house in order by 2013. European bond yields continue to move higher but the U.S. 10-year yield actually fell today indicating that European money is no longer looking for safety in German notes and bonds but instead moving money to the U.S. treasury market. This is a sign of further deteriorating confidence in Europe.
On 11/29/11, Tuesday, Eurozone Finance Ministers are meeting in Brussels. Overnight, the futures are up large, the Dow Industrials are up triple digits. S&P rating agency threatens a downgrade of France’s AAA credit rating over the next 7 to 10 days so the futures weaken and the markets stumble along the flat line. SPX moves above 1200 and the Dow Industrials move above 11600 but both end the day under. After the close, S&P cut the credit ratings on several banks including BAC, C, GS, MS and WFC.
On 11/30/11, Wednesday, EOM, the futures are red overnight on the bank downgrades. The Fed steps in and orchestrates a global liquidity intervention with the ECB, BOJ, BOE, SNB and Bank of Canada to provide support for the global financial system. BAC is automatically saved from falling under five bucks. The rumor on the floor is that a large European bank was failing last night prompting the move. Equities markets catapult higher with a wild upside orgy. The day ends with the SPX up 52 points, or 4.3%. The Dow Industrials closes above 12K, at 12046, gaining 490 points, or 4.2%. The Nasdaq gained 105 points, or 4.2%. The RUT small caps were up 41 points, or 5.9%. The session is one for the record books.
On 12/1/11, Thursday, China PMI and HSBC China PMI are both below 50 indicating economic contraction. Draghi (ECB) and King (BOE) are downplaying expectations after yesterday’s upside market orgy. Draghi says ‘do not look to the ECB to bail out Europe’ and King says ‘Europe is in systemic crisis’ and he stresses that ‘liquidity cannot help a solvency issue with banks’. Sarkozy says that the reduced-hour work-week and early retirement programs were a “grave mistake.” Merkel downplays expectations saying ‘it will take years to solve the crisis’ and the ‘Eurobond is pointless’. Christine Lagarde, IMF chief, says that the G-20 was prepared to commit more money to the IMF if it needed to play a role in solving the crisis. There are a lot of cooks in the European kitchen.
On 12/2/11, Friday, futures are up large on news that the ECB will lend money to the IMF to help support Europe. The tempo for resolving the European crisis is picking up steam so traders are encouraged by at least the perception of progress. A new European treaty is discussed among leaders with the hope of developing details on the treaty before the E.U. Summit on 12/9/11. Expectations are growing for the Summit and sensing that, Merkel says to temper your hopes about big solutions coming next week.
On 12/2/11, markets bounce strongly at the open after the lower 8.6% unemployment rate was announced. The European markets fade into the close as a rumor hits that Spain is to downgraded. U.S. markets drift lower as the session progresses remaining at the mercy of European news bites. The importance of the E.U. Summit next Friday increases by the hour. Will the European leaders be able to provide concrete solutions to their debt dilemma next week? The markets expect it. The SPX ends the week up 7.4%. Markets are making astounding moves. In 12 trading days the SPX lost 9%--then regained the 9%. The markets popped about 7% in only three trading days this week. The Dow Industrials finished up 7% on the week with the Nasdaq up 7.6%. The RUT was up 10.3%. After the close, Treasury Secretary Timothy Geithner announces plans to meet with European leaders next week ahead of the E.U. Summit, ratcheting up the importance of the E.U. Summit further. The European debt crisis is building a crescendo into next Friday, only five trading days away.
……………………the saga continues…………..
Looking ahead to next week,
Continue watching the European bond market!
Eurozone problems continue. Italy and Spain remain the big worries. Global recovery is stalling. China bubble popping.
On 12/6/11, Geithner meets with Draghi, Germany’s Schauble and other leaders
On 12/7/11, Greek budget work. Geithner meets with Sarkozy, then travels to Spain
On 12/8/11, ECB rate decision and conference. Geithner meets with Mario Monti. Jobless Claims data in the U.S.
On 12/9/11, E. U. Summit; positive news must be delivered—the markets expect it. International Trade numbers and Consumer Sentiment data in the U.S.
On 12/13/11, FOMC rate decision meeting
On 12/14/11, Vienna OPEC Oil meeting
On 12/26/11, markets are closed for the Christmas holiday
On 12/30/11, EOM, EOQ4, EOY2011.
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