Sunday, August 12, 2012

Keystone's Trading Week in Review and Path Ahead 8-12-12

On 8/3/12, Friday, China and U.K. manufacturing data remains in a funk. Overnight, Spain warms up to the idea of asking for a bailout. This has been a barrier to finding solutions in Europe (Spain providing a formal request) so the futures markets ramp higher on the happy talk. The S&P futures are up over 12 points.  The Monthly Jobs Report blows away the estimates on the headline number with 163K jobs, but the unemployment rate climbs a tick to 8.3% and the average hours worked and earnings remain lackluster, showing that employers will be in no rush to hire additional employees. The futures prefer the happy headline number and increase about three S&P points but the encouraging news concerning Spain asking for a bailout is creating the bulk of the bullish move.  After the gap up open, markets continue higher and finish at elevated levels. Keystone’s algo, Keybot the Quant flips back to the long side reversing yesterday’s move to the bear side at SPX 1377. Keystone’s SPX 30-minute chart with 8 MA and 34 MA cross flips to the bullish side. The SPX is up 26 points, 1.9%, to the important S/R level at 1391.  The Dow Industrials are up 217 points, 1.7%, to 13096. The Nasdaq is up 58 points, 2%, to 2968.  The RUT is up 20 points, 2.6%, the tech and small caps outperforming today, to 788.  Despite the uber bullish day today, for the week, the SPX, Dow and Nasdaq finished flat, and the RUT actually finished down a percent. The VIX prints a 15 handle showing that traders are uber bullish, complacent and without fear or worry about markets going down (think about this from a contrarian perspective). Later in the day, after the markets close, Spain’s Rajoy says he has not made a decision on whether to ask for help from the European rescue funds. S&P ratings agency downgrades 15 Italian banks. The banks’ assets have weakened in recent years and a severe recession will increase the problem assets that are on the books as time moves along.

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On 8/6/12, Monday, the European emergency fund is increased to allow for a circular flow of money, back-door printing, to and from the ECB and Greece. The shameful farce involves the ECB printing euro’s that are given to Greece and then Greece turns around and makes interest payments to the ECB. These shenanigans should only serve to weaken confidence in Europe over the long run. The Euro zone Sentix investor confidence declined for the fifth month to the lowest number in three years.  This is worrisome since the number reflects what participants think the economic conditions will be six months from now. In a Der Spiegel interview, Monti (Italy) says European governments should not be beholden to their respective parliaments and that the governments should simply forge ahead and get things done.  Monti’s words anger the German electorate. Monti, a typically careful speaker, likely miscalculated that his comments would receive such great attention. A system error occurs on the Spain Exchange shutting down trading. Greece promises to follow guidelines from the Troika in exchange for receiving more funds. Germany signals support for the ECB bond-buying program which provides a lift to equity markets. The Spain Exchange reopens for trading. The markets bounce early in the session and travel sideways into the close.  The SPX comes within pennies of 1400.  The Dow Industrials are over 13.1K.

On 8/7/12, Tuesday, RBA leaves rates unchanged at 3.5% and says that China’s growth rate does not appear to be slowing further. Standard Chartered Bank drops over 20%, one-fifth of its value, on news that it has carried out over 60,000 transactions with Iran totaling more than 250 billion. The bank says it has not brought on new Iranian clients for over five years and that if any transactions slipped thru they would total no more than 14 million. Italy’s recession deepens with another in a string of contracting GDP numbers.  Over the last 12 years, Italy is in recession about four of those years, one-third of the time. A system error occurs on the Tokyo Exchange shutting down trading.  These ‘computer glitches’ are occurring more and more frequently, yet another reason for Ma and Pa to be skeptical of these casino markets. The Tokyo Exchange reopens for trading.  After the close, the Mouse House, DIS, earnings beat on the bottom line but once again, in an ongoing theme, miss on the top line revenue. Company after company reports lackluster sales so there is no need to hire new workers moving forward. S&P downgrades Greece and threatens further downgrades ahead. Greece will obviously need more bailout money.

On 8/8/12, Wednesday, rubber tumbles to a new three-year low verifying a global slowdown in progress.  Asia stocks rise for a third day.  BOE lowers growth forecasts for 2012 and 2013 with a triple dip recession likely. The Fed’s Rosengren says an open-ended QE is under consideration at the FOMC. Thoughts of unlimited crack cocaine, as far as the eye can see excites bullish traders. At 1 PM, the 10-year note auction goes poorly.  Markets finish up on the day with the SPX finishing at 1402.

On 8/9/12, Thursday, China’s growth is slowing with inflation cooling.  This opens the door for China to ease so traders send Asian markets higher on hopes of stimulus.  The U.S. markets languish sideways all day long. After the bell, JWN earnings are in line so the wealthy are maintaining their spending albeit tentatively.

On 8/10/12, Friday, Hong Kong’s GDP is a paltry 1.1%.  China’s exports stall on weaker global demand and the internal domestic demand is weakening as well. Hopes that China’s domestic demand would carry their economy forward appear misplaced. The IEA projects lower oil demand verifying the global economic slowdown. The euro drops under 1.23. The Crop Report projects multi-year lows for corn and soybean yields per acre due to the drought, which creates a negative impact on a weak economy. The markets drop at the open but experience a late day surge.  Keystone’s SPX 30-Minute Chart with 8 MA and 34 MA Cross Indicator turns bearish at the opening bell and remains bearish at the close, albeit by a few pennies, which forecasts bearishness for the hours and days ahead. The SPX closes at 1406, Dow Industrials at 13208, Nasdaq at 3021 and RUT at 802. The markets were flat on the week, very indecisive and directionless.  The VIX drops under 15 showing complacency rampant in the markets.

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On 8/13/12, Monday, markets react to the Paul Ryan vice presidential pick. Europe and central bank news will dominate the action.

On 8/14/12, Tuesday, Retail Sales. PPI. HD.

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. WMT.

On 8/17/12, Friday, Consumer Sentiment.

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On 8/22/12, Wednesday, FOMC Minutes.

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On 8/28/12, Tuesday, Consumer Confidence.

On 8/31/12, Friday, EOM.  Consumer Sentiment. Jackson Hole conference begins-does Bernanke hint at QE3, or not?

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On 9/3/12, Monday, U.S. Markets are Closed in Observance of Labor Day.

On 9/4/12, Tuesday, U.S. Markets Reopen for Trading.

On 9/6/12, Thursday, ECB Rate Decision and Press Conference.

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On 9/12/12, Wednesday, FOMC Rate Decision and Press Conference. AAPL releases new iPhone details.

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