On 8/17/12, Friday, Consumer Sentiment remains in the 72-73 area for the last four months not worsening, but not getting any better. The repeated chatter about Merkel supporting the euro and that Spain is about to ask officially for a bailout continue to encourage the market bulls and the broad indexes float upwards testing the April 2012 highs and 2007 highs. AAPL sets a record surpassing 600 billion market cap closing at 648.11 with a 607.54 billion market cap larger than many countries in the world. Global drought concerns continue. Stocks gain for the sixth week in a row. The S&P 100 ($OEX) takes out the April 2012 highs matching 2007 levels when the broad market top occurred but the S&P 500 (SPX) is a few points short of taking out its April highs. The SPX is at 1418, Dow Industrials 13275, Nasdaq 3077, RUT 820. The VIX prints at five years low, a phenomenal 13.45 showing complete uber complacency in the markets. Long traders feel there is no need to buy protection since Bernanke and Draghi have a permanent put under the market. The complacency and fearlessness is further evidenced by the CPC put/call printing in the 0.7’s. Traders simply do not see the markets moving down under any scenario—and this is typically the point in time when markets will surprise you drastically. At the same time, major indexes and sectors are at key technical inflection points and volume is printing the lowest numbers of the year (ignoring the half-day holiday trading days).
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On 8/20/12. Monday, a yield cap is considered for Spain and Italy yields. Asian stocks and copper drop on China monetary policy (no news on stimulus). LOW earnings disappoint. The markets travel sideways as the messages out of Europe are mixed. Germany may, or may not, support Euro bonds, depending on who you ask. The broad indexes end the day flat. Copper drops and continues to refuse to support the market rally.
On 8/21/12, Tuesday, Germany is more supportive of the ECB buying the Spain and Italy debt, and leniency may be provided for Greece, both of which create upward buoyancy in the futures. The dollar is weaker and copper stronger which creates market buoyancy. The euro is over 1.24. Markets shoot skyward at the opening bell, the SPX takes out the four-year highs and fills the gap from 2008 at 1424-1427, but, at 11 AM, the markets fall on their sword and tumble lower ending down on the day, unable to hold the multi-year highs. Keystone’s SPX 30-minute chart shows the 8 MA stabbing down thru the 34 MA at 2 PM EST; a bearish signal for the markets for the hours and days ahead. Gold closes at 1643 and oil at 97. War talk grows louder for the Middle East fueling the spike in gold and oil. Syria degrades into chaos and Israel may strike Iran. DELL lowers guidance after the close and falls 5%.
On 8/22/12, Wednesday, Japan exports fell 8% in July on weaker sales to Europe and Asia. The markets drop at the opening bell but languish sideways ahead of the Fed Minutes at 2 PM. The FOMC Minutes show that ‘many members’ say accommodation should be provided for the economy. Fed stimulus is coming sooner rather than later so traders ram the markets higher, the dollar plummets, and copper and commodities move higher. The markets recover to the flat line, ending flat on the day at SPX 1413. In the evening, the HSBC China Flash PMI falls to 47.8 from 49.3 in July; under 50 shows contraction. China growth and demand are slowing. A Chinese official says ‘China is at the beginning of a harsh winter’. Perhaps he was referencing a Kondratieff Winter? China factory output is slowing. Since the PMI was weak, in these perverse markets, copper and commodities jump higher as traders surmise that quantitative easing will be on the way to save the day. HPQ earnings are weak in concert with DELL yesterday hinting that the PC may be an endangered species.
On 8/23/12, Thursday, overnight Asian and European markets are higher as the hope for China stimulus fuels a jump in copper, commodities, gold, and equities. A stutter step occurs in the markets at 5 AM EST as Germany’s Schauble takes a hard line against Greece saying that “more time means more bail-out funding” and “Europe has gone to the limit to help Greece.” Merkel has a more thoughtful tone which creates a good cop-bad cop routine. Schauble is playing the bad cop denouncing Greece and reading them the riot act. Then Merkel will ride in on a white horse to play good cop, the peace-maker, and find a solution. This way, German politico’s can show they put up a strong fight and struck the best deal when, in fact, it is all political theatre. Hollande and Merkel enjoy an uneventful dinner meeting. Individual cities in China are providing stimulus plans which hint that China prefers alternate routes to provide easing rather than direct interest rate cuts. Fed’s Evans says that China and the Fed should provide more easing moving forward. Fed’s Bullard, about one hour before the opening bell, on the MSNBC Business News channel, says that the FOMC Minutes are based on stale data and that traders are probably reading too much into the statement. Markets weaken on the news and the trading day progresses with markets dropping all day closing at the lows at SPX 1402. The utilities weaken further, UTIL now 6% off its high at 500 less than one month ago. The utilities sector drops under the numbers printed from 15 weeks prior, a tried and true market signal, that is very ominous for the broad markets moving forward. The RBA’s (Australia) Stevens says domestic growth is on trend and should offset the global slowdown. He says the Aussie dollar seems a ‘bit on the high side’ and predicted the boom in resources should peak in a year or two. Copper remains elevated keeping the market bulls happy.
On 8/24/12, Friday, futures are negative with copper down a half percent or more. The day begins with a gloomy tone. Markets drop at the opening bell, the SPX falls thru the psychological 1400 level and tests 1399 support. Copper is tumbling lower and utilities remain weak. All systems are go for the market bears, however, at 11 AM EST, the WSJ releases an article by Jon Hilsenrath, a perceived Fed mouthpiece, and the markets catapult higher. The article says nothing new concerning central bank action but the very suggestion that more crack cocaine (stimulus) is on the way is enough to get the crack addict (markets) jumping higher. Copper leaps upwards. Keystone’s SPX 30-Minute Chart with 8 MA and 34 MA Cross Indicator shows the 8 MA piercing up thru the 34 MA at 1:30 PM EST signaling that the bulls are in control for the hours and days ahead. The utilities sector recovers. The SPX closes at 1411 slightly down for the week. The Dow Industrials are up 101 points to close at 13158, down one percent on the week. The Nasdaq closes at 3070, flat on the week. The small cap RUT closes at 809 and drops 1.3% on the week. Money continues to chase blue chip stocks and pump the Dividend Stock Bubble higher while avoiding the riskier small caps. The SPX and Dow break their string of six up weeks in a row and Nasdaq breaks its trend of five up weeks in a row.
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On 8/27/12, Monday, Republican Presidential Convention begins. Hurricane Isaac is a scheduled guest.
On 8/28/12, Tuesday, Case-Shiller. Consumer Confidence. 2-Year Note Auction.
On 8/29/12, Wednesday, GDP. Beige Book. Oil Inventories. 5-Year Note Auction.
On 8/30/12, Thursday, Jobless Claims. Personal Income and Outlays. 7-Year Note Auction.
On 8/31/12, Friday, EOM. Full moon. Consumer Sentiment. Jackson Hole conference begins-does Bernanke hint at QE3, or not? (3-day weekend ahead for U.S. markets)
On 9/1/12, Saturday, Jackson Hole continues-does Draghi hint at LTRO3, 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. U.S. markets have their first chance to trade off the Jackson Hole developments. ISM Mfg Index. Troika Report on Greece is due early September (this is needed for leaders to make a decision on Greece).
On 9/5/12, Wednesday, …..
On 9/6/12, Thursday, ECB Rate Decision and Press Conference. Jobless Claims.
On 9/7/12, Friday, Monthly Jobs Report.
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On 9/10/12, Monday, Congress is back in session, a market negative, the childish behavior begins again.
On 9/11/12, Tuesday, Anniversary of the U.S. Terrorism Attacks. Euro Banking Union proposals.
On 9/12/12, Wednesday, German vote on the ESM (European Stability Mechanism). FOMC Rate Decision and Press Conference. AAPL releases new iPhone5.
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On 10/18/12, Thursday, ECB Summit (Merkel may avoid a decision on Greece until now? Will Greece exit the euro?)
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