On 7/6/12, Friday, IMF’s Lagarde says the European growth estimates will be lowered again. Germany’s 2-year yield goes negative where investors are willing to give up some money in return for receiving perceived safety for two years. In addition, other nations such as Belgium, Netherlands, Austria and Finland all see lower yields in recent days as investors look for additional safe havens. Finland’s 10-year yield drops under the U.K.’s now making Finland more attractive. Conversely, Spain’ s 10-year yield moves above 7%, wiping out any improvement from the Euro Summit, and Italy moves back above 6%. The all-important Monthly Jobs Report results in a paltry 80K jobs, well below the 100K consensus, with the rate remaining unchanged at 8.2%. This weak report marks the fourth in a row since the Good Friday debacle. Four reports remain until the presidential election. The futures immediately tumble on the news. Semiconductors and technology create significant weakness after the opening bell. Keystone’s proprietary algorithm, Keybot the Quant, flips short at SPX 1354. Keystone’s SPX 30-Minute 8 MA and 34 MA Cross Indicator turns bearish signaling weak markets moving forward. The broad indexes languish at the lows, ready to crack, until 2 PM EST when the Wall Street Journal posts an article by Jon Hilsenrath, “Weak Report Lifts Chance of Fed Action.” Mr. Hilsenrath is known to be perhaps a strong mouthpiece for the Fed, so traders immediately hit the buy button since more stimulus is likely on the way. With the thin volume, second lowest day of the year, it was easy for the markets to stage a comeback into the close. The SPX closed down 12 points to 1354. The Dow Industrials are down 124 points to 12772. The SPX and Dow are down on the week, the Nasdaq flat and the RUT up. The euro, XEU, prints lows not seen since June 2010.
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On 7/8/12, Sunday, in the evening, Japan machinery orders are weaker than expected and the China CPI is 2.2% under the consensus estimate of 2.3%. Futures weaken especially after Wen Jiabo warns of a growing economic slowdown for China. The Asian region sells off from Japan to Vietnam. The basic materials and mining sectors are hit hard.
On 7/9/12, Monday, the Eurozone Finance Ministers meet to finalize Spanish bank rescue. Markets stumble sideways all day long in lackluster trading. After the bell, earnings season kicks off with AA which provides results in line. Egan-Jones downgrades Austria. Investors continue to chase perceived safe havens, however, and Austria’s short duration notes are negative just like Germany and also France.
On 7/10/12, Tuesday, China Trade data sends copper and commodities lower on weaker demand. The markets steadily decline all day long. Keystone’s NYA 40-Week Cyclical signal turns bearish. In the afternoon, the financial sector weakens. CMI, a major truck engine manufacturer, releases weak guidance moving forward at 1:30 PM. The markets plummet on the news as further verification of a global slowdown occurs. VIX moves back above 19. The SPX loses 11 points to 1341. The Dow Industrials lose 83 points to 12653.
On 7/11/12, Wednesday, Rayoy (Spain) says this is a critical time for Spain, time is running out, and that Spain needs aid asap. Valencia Bank will likely serve as a ‘bad bank’ moving forward to resolve the crisis. The German Court delays hearings on the ESM and other funds. This is a problem for Spain since Germany must pass acceptance of these bailout rescue funds before Spain receives the money, which is needed within three weeks time. Asian stocks decline for the fifth straight day but slightly recover at the close. The 10-year yield drops under 1.50% and the auction at 1 PM is extremely well received as investors continue seeking safety from this global economic super storm. Markets languish sideways all day long with the SPX 1337 support holding steady. The FOMC Minutes at 2 PM are in favor of developing ‘new tools’ which would place quantitative easing on the back burner. Markets plummet. The SPX drops under 1337 but recovers by the close as markets continue to parse the Fed’s language. Markets end flat on the day. PC sales for the second quarter (April-June) decreased from one year ago.
On 7/12/12, Thursday, basic resources, miners and technology all tumble lower on a global scale. India’s Infosys, a global bellwether, lowers guidance. Japan (extends asset purchases) and South Korea (rate cut) announce plans to spur growth. Brazil cuts rates. Global nations continue along the easing path; all nations in a race to the bottom devaluing their respective currencies. The euro is moving down towards 1.22 with European markets in a sixth day of declines, on heavy volume. France 2-year yields are negative which places them in the ‘safe haven club’. Spain 10-year yields recover over the last couple days dropping back under the danger level at 7%. Global equities markets are weak after the Fed Minutes yesterday since there was no serious mention of quantitative easing. JPM and Barclay’s lower U.S. GDP estimates to well under 2% moving forward. U.S. futures indicate a very weak open on tap. The 10-year yield is 1.49%. The euro breaks down thru 1.22 for the first time since July 2010. The U.K. 10-year yield drops to 1.72% an all-time record low. The markets drop at the opening bell, the SPX slicing thru the 1337 support, then 1333, then down to 1326. Markets recover in the afternoon but roll over again in the final minutes. Traders are very cautious so markets are tentative. The SPX closes lower for the sixth day in a row. Moody’s downgrades Italy’s credit rating two notches. China GDP is 7.6%, one tick above the 7.5% level identified by China as the level of concern. Moreover, China GDP averages 7.9% for the year well above the 7.5%. Nevertheless, the copper market and other basic materials run higher in overnight trading.
On 7/13/12, Friday the 13th, the China GDP has traders excited over potential stimulus (go figure since the GDP numbers do not agree; the GDP numbers remain above 7.5%), so copper catapults higher taking the U.S. futures higher. JPM earnings are released pre-market and place a strong bid under financials. The one-two punch with copper, then financials, causes shorts to cover and a wild upside explosion in the stock market is underway. Consumer Sentiment is weak, the lowest since last December, but the upside euphoria ignores the news. Keystone’s NYA 40-Week MA Indicator turns bullish after spending the last four days on the bear side. In the afternoon, JPM says the trading loss from the ‘tempest in a teapot’ trading debacle may approach 5.8 billion instead of the 4 billion mentioned in the morning. Further, Dimon (CEO of JPM) then says the loss may approach 7.5 billion before it is all said and done. The markets continue to run higher anyway and JPM gains 6%. The SPX closes up 22 points, 1.7%, to 1357. The Dow Industrials close up 204 points, 1.6%, to 12777. The Nasdaq closes up 42 points, 1.5%, to 2908. The RUT is up 11 points, 1.4%, to 801. Interestingly, the SPX and Dow were flat on the week with the Nasdaq and RUT down a percent.
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On 7/16/12, Monday, Retail Sales.
On 7/18/12, Wednesday, Housing Starts.
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On 7/26/12, Thursday, FB earnings.
On 7/27/12, Friday, GDP. Consumer Sentiment.
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On 7/31/12, Tuesday, EOM. FOMC Meeting Begins.
On 8/1/12, Wednesday, ISM Mfg Index. FOMC Rate Decision.
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