Saturday, March 24, 2012

Keystone's Trading Week in Review and Path Ahead 3/24/12

On 3/16/12, Friday, markets move up after the bell but the weaker than expected Consumer Sentiment and AAPL flirting in and out of negative territory the markets languish sideways.  The SPX finishes the week at 1403 and the Dow at 13233. Gold lost about fifty bucks this week to close at 1660.

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On 3/19/12, Monday, China home prices fall the most in one year’s time. LaGarde says the European crisis is not over and warns of too much optimism. At 8:30 AM, AAPL announces a dividend and stock buyback program.  The hope is that this move will allow dividend funds to now carry AAPL stock and support price moving forward. AAPL shares and the markets languish sideways.

On 3/20/12, Tuesday, BHP projects flat growth in China and iron ore prices to fall. This causes commodities and especially copper to fall during the session.  AAPL is weak, so the markets are weak, but in the afternoon, Apple turns green so the markets recover. A down day occurs for markets but only marginally well off the lows earlier in the day. Keystone’s SPXA150R Indicator drops under 90 indicating broad market selling ahead.

On 3/21/12, Wednesday, markets languish sideways with a lower bias, in a continued low volume funk, in the absence of any significant news events. BHI says the shift away from drilling and oil rigs will weaken the economy as their stock is hit hard. Chairman Bernanke warns that the European crisis in not over and this is not the time for complacency.

On 3/22/12, Thursday, market weakness continues thru the New Moon.  China, Eurozone, U.K., France and German manufacturing data are all weaker than expected sending overnight futures sharply lower.  Oprah’s OWN Network falters on low viewership. FDX earnings are in line with estimates but margins fall and guidance is lowered.  The broad indexes sell off and remain weak all day long with the SPX closing down 10 points and back under 1400. NKE earnings after the bell, however, are in line and encouraging. Chancellor Merkel is booed by a couple hundred protestors in Frankfurt.

On 3/22/12, Keystone’s proprietary trading algorithm, Keybot the Quant, turns bearish flipping to the short side at 10:51 AM EST at SPX 1392. Weakness in copper and commodities are the major cause of the market selling.

On 3/23/12, Friday, Asian and European markets languish sideways and lower. Basic materials and mining stocks are getting hammered.  Fed’s Bullard says that the U.S. economy may be at a turning point as the recovery continues.  Chairman Bernanke says higher household spending is needed to sustain growth, a formidable task with gasoline at $4 per gallon. Portugal, Hungary and Italy 10-year yields blow out to the upside indicating that the turmoil in Europe is increasing again. Germany 10-year yield plummets from 2.06% to 1.88% in 48 hours showing that money is seeking the perceived safer havens. KBH releases poor earnings which shocks traders and now places the projection of a recovery in the housing sector into substantial jeopardy.

On 3/23/12, markets are weak to start the day but recover as commodities and copper trade higher. Between 10 AM and 10:30 AM, Iran announces a drop in oil exports which causes oil prices to leap higher.  Oil, commodities, gold and stocks all move higher in sync.  The expected asset relationship that Keystone has discussed many time is in place; dollar down = euro up = oil up = gold up = stocks up. Just before 11 AM, AAPL trading is halted as a trade well below the current price is executed triggering circuit breakers. Apple trading resumes quickly as the focus shifts to the BATS Exchange, which was issuing an IPO of its own exchange of all things, which contributed to the crash of the exchange.  The IPO is now withdrawn. The problem resembled the May 2010 Flash Crash, albeit in a much smaller way.  It also shines a new spot light on HFT (high-frequency trading) as well as the reliability of smaller exchanges that rely on technology. In addition, the dark pools, which represent trading volume and liquidity not openly available to the public, will come under closer scrutiny moving forward.  After the dust settled on the wild trading day with the AAPL trading halt, the Iranian oil export data, and the mini-flash crash with BATS, stocks end the day logging the worst week of the year. The SPX closes at 1397 losing a half percent this week.  The Dow Industrials are down on the week but the tech strength continues to show with the Nasdaq Composite eeking out a gain for the week. Gold is up for the week recovering from recent losses.

On 3/23/12, the drama continues when news reports state that John Corzine, the shamed head of MF Global when it collapsed, gave ‘direct instructions’ to move $200 million from an MF Global customer account to remedy a $175 million overdraft problem that was hampering MF Global’s ability to buy and sell securities in its final days. The customer accounts are not to be touched as per federal regulations.  An email by Edith O-Brien, an assistant treasurer, states that the action was ‘per JC’s direct instructions’, obviously, JC is the initials of John Corzine.  This bombshell news blows the situation wide open since Corzine’s testimony before Congress may have contained falsehoods. The news potentially sets up what may be the most historic perp walk in financial history coming to a television near you.

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On 3/26/12, Monday, watch for window dressing this week although Keystone cannot remember a more publicized window dressing event ever.  Perhaps some of the late day Friday buoyancy was already front-running the anticipated window dressing for the quarter but if market buoyancy does not show early in the week markets could head for trouble. Listen for earnings warnings to gauge projections for Q1. Lowered earnings estimates will seriously dampen the bull rally.  Hearings begin in the States over the constitutionality of President Obama’s Healthcare Program, now reaching its 2-year anniversary. Lots of Fed talk in the new week ahead, especially the doves, so the money pumping talk may be prominent.  Quantitative easing is the support under the markets so as long as the Fed keeps dealing out the crack cocaine, the markets are happy. If QE is mentioned markets will move up, if there is an eerie silence with little or no mention of QE by the Fed heads, markets will sell off. Fed’s Plosser speaks. Chairman Bernanke speaks. Pending Home Sales.

On 3/27/12, Tuesday, Case-Shiller Housing Index.  Consumer Confidence. Chairman Bernanke speaks. 2-Year Note Auction.

On 3/28/12, Wednesday, Durable Goods Orders. Oil Inventories. 5-Year Note Auction. Fed’s Bullard speaks.

On 3/29/12, Thursday, GDP. Jobless Claims.  Natty Inventories. Fed’s Plosser speaks. 7-Year Note Auction. Fed’s Lacker speaks.

On 3/30/12, Friday, EOM, EOQ1. Personal Income and Outlays. Chicago PMI. Consumer Sentiment. China PMI.

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On 4/2/12, Monday, first day of Q2. ISM Manufacturing Index.

On 4/3/12, Tuesday, FOMC Minutes.

On 4/6/12, Good Friday holiday, U.S. markets are closed. Oddly, the Jobs Report is released today but U.S. traders will not be able to react until Monday, 4/9/12.

2 comments:

  1. Is AAPL influencing the market so much ?

    ReplyDelete
  2. Hello Tech, yes, Apple is the markets. Markets began the year positively moving up from the mid-December bottom into mid-January. Even the most optimistic pumpers of AAPL were shocked at the power of their mid-January earnings. This catapulted the tech sector, XLK, and the Nasdaq indexes which led the markets higher into the present. The move in AAPL from mid-December is 380 to 600, or 58%, which is obscene and parabolic. The broad markets are up less than one-third of that in the same time frame.

    Over 90% of funds and money managers own Apple stock. It is unprecedented to see one stock control the entire market like this, after everything the markets have seen in recent years, but here we are.

    Say every 70-point jump in Apple equates to a 7% market move higher. The thing that no one thinks about, as the wine is flowing and the girls are dancing, is that this relationship will likely work in reverse the same way. So Apple dropping from 600-ish down into the low 500's will probably equate to a market pull back of about 7%. AAPl into the 450-ish area would probably be a pull back of 15% in the broad market. So, yes, Apple is the markets. Also, Q4 is the strongest quarter for tech stock price-wise, this rippled into Q1, the summer is the worst, so accelerated of tech stocks would be expected now due to seasonality as well. Of course bulls will tell you that AAPL will never go down from 600.

    ReplyDelete

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