On 10/18/12, Thursday, the China GDP is 7.4%, the seventh consecutive quarter of slowing growth, the slowest growth number since the first quarter of 2009. China’s Premier Wen Jiabo says the economy is ‘stabilizing’. The data smells since electricity usage is flat in China; growth is not at that pace if electricity usage is flat. Further, the 7.4% is under China’s targeted rate of 7.5% for 2012. But, thinking in the context of the entire year, Q1 was 8.1%, Q2 was 7.6%, and now Q3 is 7.4%, and applying the 7.5% as a target for the entire year, would allow a print for Q4 at 6.9% which would all average out to the 7.5% target for 2012. Everyone keeps playing games so Keystone predicts the China Q4 GDP, released in mid-January 2013, will be 6.9%, bank on it. Spain’s bad loan percentage is now 10.5% versus less than 10% a month ago, the banking situation is obviously deteriorating as more and more investors pull their money from Spanish banks. The European leaders from 27 nations attend the ECB/Euro Summit likely heading straight for the buffet table. The major U.S. banks provide a letter to Congress and the President stating that the Fiscal Cliff is a huge concern and the uncertainty is hurting the markets and economy. Markets start the session positively into lunch time. The SPX moves higher only three points away from the closing high for this year 1465.77. Then whammo!! The GOOG earnings release surprisingly hits the markets. The printer accidentally releases the earnings early. Traders see that GOOG’s numbers are much worse than expected so GOOG, the Nasdaq and the broad indexes plummet. GOOG drops with a mini-crash profile from 755 to 776, 80 points, 11%, in only eight minutes, dropping $10 per minute. GOOG is halted from trading. At 3:20 PM, GOOG begins trading again moving sideways thru 680-700. GOOG officially releases the earnings after the bell and the numbers match the premature release. On a comical side note, the premature release had three words written at the top of the page; ‘PENDING LARRY QUOTE’. This was a placeholder where Larry Page would have inserted a witty quip as the release occurred. In this tech age, a Twitter handle immediately appeared called PendingLarryQuote and the domain name was secured. Funny YouTube videos and other humor appeared across the Internet. Traders are shaken by the debacle which is yet another reason for Ma and Pa to look at the markets as one big casino machine. The broad indexes finish the day well off the highs. Keystone’s SPX 30-minute chart shows the 8 MA moving down thru the 34 MA indicating bearish markets for the hours and days ahead. After the close, CMG takes the oven pipe losing 12% and BBT drops 7% on earnings disappointments. A sour mood on technology continues thru the evening hours.
On 10/19/12, Friday, today is OpEx and the twenty-five year anniversary of the 1987 Black Monday Crash. GE earnings miss on the top line. HON lowers guidance. MCD misses earnings. These three bellwether stocks create weak futures heading into the opening bell. During the conference call, GE lowers their growth projection for the next year from 5% down to 3%. The EU Summit announces that they will set a date certain for the banking union to take affect but they avoid the hard work of actually agreeing to a detailed banking union outline. Rajoy says he feels no pressure to request a bailout. This is due to the lower Spanish yields, the 10-year falling from over 7% to under 6% over the last couple months. The only reason the yields are lower is because of the ECB bond-buying program announcement but the program is based on Spain asking for a bailout; everyone thought that was a given. Spain wants to avoid the negative connotation that comes with a bailout, the Spaniards are proud people. That is why you hear about all these other ideas such as ‘lines of credit’, Spain wants to receive the bailout life preserver since they are drowning but does not want the word bailout, or any stringent conditionality, to be attached. The problem is that the ECB cannot actually institute bond-buying to save Spain without Spain formally asking for the bailout. This is the circular drama playing out each day and it is controlling the U.S. markets. Traders are getting sick of these shenanigans, each day waiting for Rajoy to hint that a bailout request is imminent, or not, watching to see if he coughs or picks his nose. But this is the true nature of global markets in October 2012. Merkel (Germany) and Hollande (France) are clashing over how to structure financial aid. Germany wants austerity and oversight to be put in place first for a troubled nation, then financial aid to follow. France wants the financial aid to happen quickly and the austerity and oversight can be developed over time. This Hollande-Merkel drama, Hokel, and feeling that the European debt crisis is starting to hit snags again, is weakening global markets.
On Friday, the markets drop at the opening bell and head lower all day. The tech sector weakness, especially chips, bludgeons the Nasdaq and this market leader drags everything south. Semiconductors, SOX, are beaten severely. Copper collapses which causes another leg down. Then volatility spikes higher further beating the broad indexes. Keystone’s SPX 60-minute chart shows price stabbing down thru the 200 EMA which signals bearish markets for the hours and days ahead. Keystone’s algorithm, Keybot the Quant, flips to the short side at SPX 1442. By noon, the SPX has lost 20 handles. At 2 PM, the SPX loses the 50-day MA. The SPX drops from 1457 to 1433 losing 1.7%. The Dow Industrials lose 1.5% closing at 13344. The Nasdaq (tech) plummets 2.2% closing at 3006. The RUT (small caps) drops 1.9% to 821. As highlighted over the last month, the tech and small cap weakness is leading the markets lower. For the week, the SPX and Dow are flat as Keystone’s singing is, but the Nasdaq loses 1.3% and RUT is down a smidge, again showing the tech and small cap weakness versus the broad market. Quite a dramatic day with the Nasdaq committing a 2.2% hari-kari on the anniversary of the 1987 Crash.
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On 10/21/12, Sunday, the Asian market reaction is muted to the selloff in the States. The Kospi and Nikkei drop but recover from the lows. The Spain regional elections finish in favor of Rajoy; his homeland Galicia supports his ideas.
On 10/22/12, Monday, Japan exports drop more than expected. CAT beats on the bottom line but misses on the top line and provides weaker guidance. The markets begin the day moving on each side of the flat line and the SPX wrestles with the 50-day MA at 1433. Rajoy says the Spain bailout may be delayed until November (he probably wants to get beyond the Catalonia elections on 11/25/12). Spain and Portugal are major concerns moving forward. The markets are weak all session long until at 2 PM when an article hits the wires saying the Fed may provide even more stimulus in addition to the QE3 Infinity. This is pathetic; Chairman Bernanke already shot all his bullets, now he wants a do-over. The Fed wants to abandon the calendar date approach for forward guidance in favor of numerical targets for policy. The markets like the QE news. AAPL jumps higher leading the broad indexes higher into the close. The Dow Industrials recover almost 100 points. YHOO and TXN beat after the bell but TXN lowers guidance. The third and final Presidential Debate Obama v. Romney occurs in the evening resulting in a slight edge for President Obama, but this is expected since he knows all the current foreign intelligence. Governor Romney simply demonstrated that he is calm and collected to be the Commander-in-Chief. Each political side spins the debate in their direction. The election is now only fourteen days away and the independent voters in the middle will decide the outcome.
On 10/23/12, Tuesday, Moody’s lowers the credit ratings on five Spanish regions. Mulberry luxury goods provider in the U.K. lowers guidance dragging Burberry down as well (the wealthy are spending less). The earnings take a turn for the worse with DD hugely disappointing, then UTX, MMM and UPS. The S&P futures are down over 15 points pre-market. Many of the earnings reports are falling into a similar trend pattern; beating on the bottom line but missing on the top line and lowering forward guidance. The two-day FOMC Meeting begins. Markets collapse at the opening bell with the SPX falling below 1420. At 10:23 AM EST, the SPX is down 20 points, the Dow Industrials are down 200 and the Nasdaq is down 30 points. Oil falls to 86. Gold is down 17 falling under 1710. The VIX spikes to near 19. The euro falls under 1.30. At 10:50 AM, the SPX is down 23 to 1410, the Dow is down 230 points to 13114, and the Nasdaq is down 37 to 2980. The VIX is over 19. A palpable fear is creeping into markets. The 10-year is 1.76% down from 1.80% yesterday. The AAPL iPad Mini announcement disappoints with a very high price point at $330 and a product line with too many offerings, the opposite approach that Steve Jobs preferred, where he always wanted streamlined simplicity. AAPL stock is beaten falling from 635 to 612 dragging the broad indexes lower to finish the day with a large sell off. The SPX lost 21 points, 1.5%, to close at 1413. The Dow Industrials lose 243 points, the third largest decline of the year, 1.8%, to 13103. The Nasdaq dumps 27 points, 0.9%, to 2990, losing the 3K level. The RUT lost four points, 0.5%, to 816. Tech and small caps have led the recent decline but not today. Gold is at 1711. Oil is 86.49. The VIX jumped over 19 today. FB earnings beat and the stock jumps higher AH’s but NFLX disappoints so its stock it is bludgeoned losing over 16%.
On 10/24/12, Wednesday, China Flash PMI is better than expected which encourages thoughts of a soft landing. Copper and commodities are buoyant. Europe begins the session encouraged by China but things quickly deteriorate. Swedish confidence drops. German and France PMI’s are worse than expected. The euro plummets dropping thru 1.30. The Eurozone PMI disappoints. German Business Confidence is worse than expected. The euro continues a downhill slide falling to 1.2934. The Spain 10-year yield is climbing to 5.69%. ECB’s Draghi meets with German law makers to explain the OMT bond-buying program. The broad indexes move sideways into the Fed decision. The FOMC Rate Decision at 2:15 PM provides no real surprises. Markets tank on the announcement with the SPX falling from 1416 to 1407.
On 10/25/12, Thursday, companies announcing major job cuts this week include F, DOW, DD and AMD. Dow and Dupont are particularly disturbing since chemicals, plastics, paints and resins are the building blocks of all global recoveries. Despite the continued weaker earnings picture, markets bounce strongly after the opening bell. Volatility is increasing so the intraday market moves are becoming more dramatic, and today is no exception. The SPX tags 1421 then promptly falls on its sword dropping to an intraday low at 1405 at lunchtime. Markets float upwards as the day moves along finishing upbeat anticipating great earnings news from tech bellwethers Amazon and Apple. After the closing bell, AMZN and AAPL disappoint with earnings. The iPhone and iPad sales are slowing. AAPL slips under the 600 level. Futures and global markets sell off.
On 10/26/12, Friday, Asian markets sell off on the Amazon and Apple misses. The euro is at 1.2927. Spain unemployment is now over 25%. The Spain 10-year yield is at 5.67% with the worst week in eight weeks. Spain appears in no rush to request a bailout so the ECB will not go in to buy bonds. Germany 10-year yield is down to 1.55% as traders seek perceived safety. S&P rating agency downgrades BNP Paribas and other French banks on concerns over the economic risk in France. JPM’s CEO Dimon says that recession is likely in the U.S. in 2013 and the fiscal cliff dilemma will exacerbate the trouble. Dimon says the fiscal cliff continues to hurt companies because the indecision and worry is causing companies to not hire anyone or expand until they see resolution. The Libor probe widens to 16 total banks with subpoenas on tap for nine new banks including BAC, Mitsubishi, Credit Suisse, Lloyds, Ragobank, Royal Bank of Canada, Societe Generale, Norinchukin Bank and West LB. Gold is dropping for three weeks now at 1700-ish. European markets are a sea of red. The S&P futures are down over 10 and the Dow Industrials are down over 100 as traders wake on the East Coast. MRK earnings are better than expected and the GDP comes in at 2.0%. The 2 handle excites bullish traders since 1.8% or lower was expected. The real number, that will probably be reported weeks from now, will likely be lower, but for today, the 2 handle reverses the sad mood from the AMZN and AAPL earnings. The GDP benefited from the government pumping money into the defense sector over the last few weeks. The futures perform a miraculous comeback from down 12 S&P’s all the way back to the flat line as the opening bell rings. Markets trail lower all morning long and the SPX tests the critically important 1403 support at lunchtime, and bounces. The SPX launches from 1403 up to 1417 then drops into the closing bell finishing at 1412. The major indexes print another down week the SPX dropping 1.5% this week, the Dow Industrials down 1.8%, Nasdaq (tech) down 0.6% and the RUT (small caps) down 0.9%. Note that the leadership of small caps and tech to the downside over the last three weeks has diminished providing the bulls some hope.
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On 10/29/12, Monday, all eyes are watching the Hurricane Sandy ‘Frankenstorm’ that is going to hit the East Coast of the U.S. The BOJ is in focus since easing moves are expected to weaken the value of the yen (dollar/yen pair will move higher). Earnings season continues. Personal Income and Outlays (a Fed fave).
On 10/30/12, Tuesday, Case-Shiller Housing Index. Consumer Confidence. Fed heads will speak from today thru Friday.
On 10/31/12, Wednesday, Halloween. EOM. Chicago PMI. Oil Inventories.
On 11/1/12, Thursday, ADP Jobs Report (a warm-up for Friday). Jobless Claims. ISM Manufacturing Index.
On 11/2/12, Friday, Monthly Jobs Report—last report before the election. Factory Orders.
The moving parts in Europe include the Spain bailout (ECB cannot buy bonds until Spain asks for the bailout relinquishing some of their sovereignty and agreeing to conditionality; bailout request will likely not occur until November), Greece bailout, Cyprus bailout, perhaps all three countries will be packaged together, and the banking union. The ECB rate decision will move the euro on 11/8/12. Greece will likely stay in the euro until Merkel’s reelection occurs next year. The Spain bailout drama is controlling markets currently with the SPX using the Draghi put at 1403 as support.
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On 11/5/12, Monday, ISM Non-Manufacturing Index.
On 11/6/12, Tuesday, U.S. Presidential Election Obama v. Romney, the result will be known in the evening from 9 PM thru 12 PM EST.
On 11/7/12, Wednesday, the election aftermath. 10-Year Note Auction.
On 11/8/12, Thursday, the new China Premier Xi Jinping is officially selected and named the Head of Party, but, where is he? The transition of China leadership begins with China holding the 18th Party Congress. ECB Rate Decision and Press Conference; rate cut means euro down and stocks down, no cut means euro up and stocks up. International Trade and Jobless Claims.
On 11/9/12, Friday, Consumer Sentiment.
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On 1/1/13, Tuesday, ESM is officially up and operating.
On 1/2/13, Wednesday, if Congress does not act, the U.S. hits the ‘massive fiscal cliff’ (a phrase coined by Chairman Bernanke in early 2012) that will cut the GDP, increase unemployment and immediately launch the country into recession, but, on the positive side, the nation’s debt will decrease. On 9/13/12, Bernanke says the Fed does not have tools to handle the fiscal cliff.
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In February or March, new China Premier Xi Jinping is named Head of Government and takes over complete control.
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