On 7/20/12, Friday, markets drift lower as the U.S. open approaches. Finland and Germany vote to back the Spanish bailout. At about 8:15 AM EST, Valencia, a region in Spain, asks for bailout help. The euro and futures markets drop lower. China tightens the property rules to tone down their housing bubble but this is the exact opposite of why copper leaped higher yesterday. Traders were expecting China to ease and are caught completely off guard. Copper collapses 2%. The euro drops under 1.22 to a 2-year low. An ugly close occurs for Europe at 11 AM EST adding further negativity to U.S. equity markets. European, especially Italian, banks are crushed today. The SPX ends the day down 14 points, 1%, to 1363. The Dow Industrials are down 121 points, 0.9%, to 12823. The Nasdaq is down 41 points, 1.4%, to 2925. Note the tech weakness compared to the broad market. For the week, the indexes finished up about one-half percent. On what should have been a positive day since the Spanish bailout appears to be a done deal, the markets sold off strongly instead, a sell-the-news type event. Instead of Spanish yields moving lower, they catapult higher with the Spain 10-year yield blowing out to 7.27% and higher, and the Spain-Germany 10-year spread blowing out to over 600 points. The collapse in the Spanish bond market and the riots are causing great concern. Anti-euro sentiment is growing in Italy and there is a fear that rioting will increase in Italy, especially after union bosses say strikes are being planned.
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On 7/22/12, Sunday, China says that growth may drop to 7.4% and lower, under their self-imposed target of 7.5% for this year. Miners and basic materials sell off strongly as well as Asian and Australian markets. Germany’s Roesler says he is ‘highly skeptical’ that Greece can remain in the euro. A Der Spiegel article says that the IMF will no longer provide funding to Greece. All of this dire news sends U.S. futures markets lower. Germany’s 10-year yield drops to 1.14%, near the previous record low while the U.K. and U.S. print record low yields. The U.S. 10-year low print is 1.409%.
On 7/23/12, Monday, the European markets open and the euro drops under 1.21, an 11-year low. Despite the Euro Finance Ministers approving the Spanish bank rescue plan on Friday, Spain yields are blowing out to the upside; the 10-year yield is now above 7.5%, above the prior record high at 7.29%. The Spain-Germany spread blows out to 642. Spain’s GDP is released and is weaker than expected. Obviously, Spain is mired in recession and now needs a complete sovereign bailout. Spanish equity markets drop over 4%. The Italy 10-year yield is now approaching 6.5% with the Italy-Germany spread at 527 indicating major stress. Merkel adds gasoline to this morning’s fire when she says that Germany will not supply further aid to Greece. Realizing the negative impact of such a statement, Germany quickly back peddles saying they will await the Troika’s decision before assessing further funding for Greece. Italian banks are down over 5% with select banks suspended from trading to try and restore calm to markets. S&P futures are down 15 at 6 AM EST. Copper and commodities are dropping strongly. MCD earnings disappoint.
On 7/23/12, Keybot the Quant algorithm flips short at 9:30 AM on the gap down opening at SPX 1348 signaling bearish markets ahead.
On 7/23/12, markets drop large at the open but then recover for the remainder of the day. Spain places a ban on short selling for all stocks for three months. Italy imposes a ban on short selling the banks. Keystone’s NYA 40-Week MA indicator signals bearishness ahead. The SPX lost 12 points, 0.9%. Dow lost 101 points, 0.8%. After the close, CSCO announces mass layoffs. TXN earnings provide weak guidance. Moody’s lowers the outlook to negative for Germany, Netherlands, Luxemburg but maintains Finland’s rating.
On 7/24/12, Tuesday, Spain bond yields continue to blow out higher and the yield curve is at or near inversion for the 5’s thru the 30’s. The Troika meets to discuss Greece as the 10-year yield moves to 28%. Merkel says that Germany will remain the safe haven thru the ongoing debt crisis. UPS earnings miss estimates and lower guidance is provided which creates negativity in the markets. After the opening bell, volatility spikes higher and the retail sector rolls over sending markets lower. Keystone’s SPX:VIX Ratio Indicator drops under 68 which is a very bearish signal for markets. During the final one-half hour of trading, the WSJ releases an article by John Hilsenrath, who is accepted to be a mouth piece for the Fed, that the Federal Reserve is moving closer to action either on 8/1/12 or at the September meeting. Stocks move higher into the close but the Dow Industrials close down 104 points logging the third triple digit down day in a row. The SPX drops 12 points, 0.9%. The Nasdaq drops 27 points, 0.9%. After the close, the much-awaited Apple earnings result in a huge miss. iPhones are losing share to Samsung and Droid. AAPL stock tumbles 6% and the S&P futures immediately dump 10 handles.
On 7/25/12, Wednesday, German business confidence drops to a two-year low. Concern increases over Germany’s exposure to the troubled countries within the euro. AAPL earnings are hurting the Nasdaq futures but the S&P and Dow futures are moving up on news that the ECB plans to boost the firepower of the Euro zones new bailout fund. Traders smell stimulus. CAT and BA earnings provide bullish results adding bull fuel for the markets. New Home Sales are weaker than expected. Markets end the day flat. Keystones’ SPX:VIX Ratio Indicator closes back above 68 which is bull-friendly and dampens bearish spirits. Egan-Jones downgrades Italy.
On 7/26/12, Thursday, C economists say there is a 90% chance that Greece will exit the euro. The futures deteriorate and steadily move lower but at 6:15 AM EST, Draghi (ECB) says, “The ECB will do whatever it takes to preserve the euro and believe me it will be enough.” The S&P futures catapult higher from a minus five to plus six in a few minutes time, an 11 handle move. Obviously, the markets are a casino that moves up and down depending on whether or not crack (stimulus) is provided. XOM earnings disappoint and Dow Chemical, who provides the building blocks of any recovery, reports weak earnings and guidance, but the markets run higher on the Draghi comments with the S&P’s up 20 in front of the open. Markets run higher all day long in a Draghi-fueled upside orgy party. Financials, retail, semiconductors and lower volatility lead the upside. Traders ignore that copper and commodities, the sectors that should benefit the most from stimulus measures, are flat and underperforming. Keystone’s NYA 40-Week MA Cross Indicator turns bullish in the final minutes only to drop back into the bear camp in the final minute. At the close, the SPX is up 22 points, 1.7%, to 1360. The Dow Industrials are up 212 points, 1.7%, to 12688. The Nasdaq is up 39 points, 1.4%, to 2893. After the bell, AMZN and FB earnings are lackluster. FB tumbles 10%.
On 7/26/12, Keybot the Quant algorithm flips long at 9:30 AM on the gap up opening at SPX 1349 signaling bullish markets ahead.
On 7/27/12, Friday, Spanish banks are weak with Banco Popular saying, “the real-estate crisis is worsening and more developers are throwing in the towel.” Spain’s unemployment rate hits another record high at 24.6%. The Draghi Rally is fading and sputtering this morning with European markets lower, the euro is lower, the Italy 10-year is over 6% again, and the Spanish 10-year yield is approaching 7% again. Lots of mixed messages are occurring out of Europe concerning the ECB, ESM Fund the EFSF Fund causing markets to become jumpy from the confusion. GDP is 1.5%, better than expected, but a horribly low number for a recovery, in essence, there is no recovery. The markets bounce higher at the open. Keystone’s NYA 40-Week MA Cross Indicator turns bullish at the opening bell which is a major bullish signal moving forward. Plenty of short players are not buying the market rally and hold tight. Hollande and Merkel vow to do all that is necessary to support the euro moving forward. Markets head higher on the news squeezing more shorts.
On 7/27/12, Friday, Spanish banks are weak with Banco Popular saying, “the real-estate crisis is worsening and more developers are throwing in the towel.” Spain’s unemployment rate hits another record high at 24.6%. The Draghi Rally is fading and sputtering this morning with European markets lower, the euro is lower, the Italy 10-year is over 6% again, and the Spanish 10-year yield is approaching 7% again. Lots of mixed messages are occurring out of Europe concerning the ECB, ESM Fund the EFSF Fund causing markets to become jumpy from the confusion. GDP is 1.5%, better than expected, but a horribly low number for a recovery, in essence, there is no recovery. The markets bounce higher at the open. Keystone’s NYA 40-Week MA Cross Indicator turns bullish at the opening bell which is a major bullish signal moving forward. Plenty of short players are not buying the market rally and hold tight. Hollande and Merkel vow to do all that is necessary to support the euro moving forward. Markets head higher on the news squeezing more shorts.
On 7/27/12, at 1:15 PM EST, Bloomberg reports that ECB’s Draghi are working to reach consensus on new measures to ease the Eurozone’s debt woes. Bond purchases, an interest rate cut and long-term financing operations are all on the table. At the same time, Germany appears on board with all this happy stimulus talk which encourages the market bulls further. The equity markets launch vertical again, die-hard shorts now throwing in the towel, creating another short-covering upside orgy rally. The SPX jumps to 1389, a 60 handle upside move in the last 20 hours of trading. The SPX is moving up at a pace of 3 points per hour, or one-quarter percent per hour. Spain and Italy yields move lower. Markets are trading directly off the European news flow and weak economic data, company earnings and guidance do not matter. The wine is flowing like water.
On 7/27/12, as the session ends, the TICK prints near +1500, an obscene high, the NYAD is over +2000, the TRIN prints an uber low 0.2’s number, all these parameters verifying the off-the-charts bullishness now in place for markets. The VIX is under 17 and the CPC is low indicating market complacency. Markets are not climbing a wall of worry but traders are rather relaxed and complacent knowing that the Fed and ECB will always be there to save the day—next week actions must back up the talk. At the close, the SPX is up 26 points, 1.9%, to 1386. The Dow Industrials are up 188 points, 1.5%, to 13075, closing above 13K for the first time since May. The Nasdaq jumps 65 points, 2.2%. For the week, the SPX gained 23 points, 1.7%. The Dow gained 253 points, 2%. The Nasdaq gained 33 points, 1.1%. After all the smoke clears, realize that the SPX is simply a smidge above where it was seven days ago, at the 1380’s. The Nasdaq did not take out the previous July highs, neither did the small cap RUT. Thus, the SPX and Dow jumped this week with tech and small caps less enthusiastic. Traders ran to dividend stocks further stoking the ongoing Dividend Stock Bubble. Something must have really scared the central bankers into action this week, either Greece is completely over the cliff now, or a major negative event has occurred in the Spanish regions, or other European debt situation. Geithner is flying over to meet with European officials. The last three days of events smack of desperation.
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On 7/30/12, Monday… the earnings parade continues. Wednesday thru Friday this week is set up for market insanity.
On 7/31/12, Tuesday, EOM. FOMC Meeting Begins.
On 8/1/12, Wednesday, ISM Mfg Index. FOMC Rate Decision. Full moon.
On 8/2/12, Thursday, ECB Rate Decision and Press Conference. Jobless Claims.
On 8/3/12, Friday, Monthly Jobs Report. FOMC Rate Decision.
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On 8/8/12, Wednesday, 10-Year Note Auction.
On 8/9/12, Thursday, Jobless Claims. 30-Year Bond Auction.
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On 8/14/12, Tuesday, Retail Sales. PPI.
On 8/15/12, Wednesday, Spanish stress test results are due from an independent auditor. CPI. Industrial Production.
On 8/16/12, Thursday, Housing Starts. Jobless Claims.
On 8/17/12, Friday, Consumer Sentiment.
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