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. Keystone’s SPX 150-Day MA Slope Indicator signals a Cyclical Bear Market ahead.
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On 10/28/12, Sunday, Draghi supports Schaeuble’s proposal for a European commissioner to oversee the bailouts for troubled nations but EU treaties would require revision so the path ahead is a long one. Tension mounts as Hurricane Sandy approaches the East Coast of the U.S. The storm is a 100-year event, the largest storm ever seen in the Atlantic Ocean. The NYSE announces that the floor trading will be closed on Monday but electronic trading will continue.
On 10/29/12, Monday, Rajoy (Spain) and Monti (Italy) meet and disagree over the timing of the Spain bailout request. It is in Italy’s interest to see Spain request a bailout immediately since the ECB bond-buying will help Italy’s debt situation. Spain, however, continues to see no rush to request the bailout and Rajoy says “Spain will request a bailout when it is in their interest.” The worries over the Hurricane Sandy ‘Frankenstorm’ become more serious and cause the exchanges to announce closure of all trading for Monday and possibly Tuesday. Many companies delay their earnings releases due to the hurricane. The Consumer Confidence number scheduled for tomorrow is now pushed to Thursday. Futures trading continues unaffected (albeit lower volumes) into the 9:15 AM EST close. Hurricane Sandy reaches landfall Monday afternoon wreaking havoc with high winds, rain, flooding and some snow. The New York subway floods cause fires. Transformers and a substation explode resulting in power outages throughout New York. Folks take shelter for a long night ahead. Futures markets open as normally scheduled at 6 PM EST. AAPL announces a shake-up at the top with key personnel leaving the company due to the Mapgate problems. In the evening, a rumor hits Twitter that the floor of the NYSE is flooded. The message is immediately re-tweeted by many causing anxiety since obviously the markets would remain closed for an extended period, but, the hoax was quickly rebuffed by eyes on the ground confirming that no such flooding is occurring; the NYSE did not experience any water damage but is operating on reserve power.
On 10/30/12, Tuesday, U.S. markets will be closed today. .Futures markets will remain open thru the 9:15 AM EST closing time today and are printing negative numbers for the S&P’s, Dow Industrials and Nasdaq as the sun rises on the East Coast. Markets must open tomorrow, even if only for a couple of hours, since funds need an EOM, and for some, an end-of-fiscal-year print, for accounting purposes. The markets have not been closed for two consecutive days due to weather since 1888, over 100 years ago. Hurricane damages are estimated to exceed 20 billion dollars. Much of New York remains without power. Lower Manhattan is now blacked out. The euro moves up and away from the psychological 1.29 level, printing at 1.2947, and creating buoyancy in the European markets. Spain GDP shows five consecutive quarters of contraction and this will only get worse in the months ahead as austerity measures bite. The BOJ announces stimulus measures as the markets expected but surprisingly, the yen does not weaken, and the dollar/yen pair actually moves down rather than moving up. UBS (major Swiss bank) announces 10K layoffs that will occur over the next three years as the bank closes its fixed income division. The trend of major companies announcing mass layoffs is worrisome for global markets moving forward. Earnings releases and economic data releases are in disarray this week due to the hurricane. Traders anxiously await word that trading will resume tomorrow. At 12:45 PM EST, the NYSE says that floor trading will resume tomorrow with a normal trading day expected.
On 10/31/12, Wednesday, Halloween. EOM. Traders return to the NYSE floor despite the subway not operating and minimal functionality with public transportation. Traders and media are staying in local hotels to avoid the harrowing commute. Unfortunately, much of Lower Manhattan is without power so the hotel stays are far from comfortable. The NYSE back-up generators are working, however, and the front entry lights of the NYSE serve as a beacon in the New York darkness. The markets open without a hitch. Large volume occurs at the open due to pent-up demand from the two-day lull and the need for mutual funds to close out fiscal books. About 25% of the mutual funds use 10/31/12 as their fiscal year end so it was important to achieve the end prints today. Keystone’s SPX 30-minute chart shows the 8 MA moving up thru the 34 MA indicating bullish markets for the hours and days ahead. Volume is light all day long then a rush of higher volume occurs late day. There are cell phone and some internet conductivity issues throughout the day but overall, the markets operate smoothly. At 12:30 PM, 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. Volatility jumped higher and the markets finished flat after the SPX explored both the bottom of an ongoing sideways channel at 1406 and the top of the channel at 1419. The bulls and bears are fighting it out thru this 1403-1419 support/resistance zone. The SPX prints a down month for October after four consecutive up months. The IMF says they will issue another growth warning. Merkel says the Eurozone must regain credibility.
On 11/1/12, Thursday, China PMI is a touch above the 50 level indicating that the economy may be turning around. The China HSBC PMI, considered being a bit more reliable remains under 50. Copper and commodities jump higher. ADP Jobs Report comes in higher than expected but ADP changed their calculation methodology so traders are scratching heads as to how this may correlate to the Jobs Report tomorrow. Futures remain flat with the S&P’s recovering five points from the negative side over the last few hours before the opening bell. Markets jump higher at the open to the SPX 1419 resistance. Keystone’s SPX 30-minute chart shows the 8 MA moving up thru the 34 MA indicating bullish markets for the hours and days ahead. Auto sales across the board come in slightly weaker than expected. At 10 AM, the Consumer Confidence number is the highest since 2008 and the ISM also is better than expected so the broad indexes launch and never look back. The bulls are running and long traders proclaim that the bottom is in and the markets will move higher into the election. The SPX ends up 15 points, 1.1%, to 1428. The Dow Industrials are up 136 points, 1.0%, to 13233. The Nasdaq is up 43 points, 1.4%, to 3020. The RUT is up 9 points, 1.1%, to 828. Gold is at 1717 and the 10-year yield is at 1.72%. November starts with the largest market gain since the Bernanke QE3 Infinity announcement rally on 9/13/12. Tech led the way higher with the semiconductor rally but the small caps were not leading higher. The oddity in the bullish action is the euro dropping since the euro should be moving higher with equities. The euro remains above 1.30. Keystone’s SPX 150-Day MA Slope Indicator reverses the Cyclical Bear Market signal from last week but this is a game of pennies and the signal should turn bearish in the days ahead again. Keystone’s UPS 20 and 50-Week MA Cross Cyclical Signal Indicator is on the verge of turning bearish.
On 11/2/12, Friday, the euro collapses under 1.30 overnight. The key 128.80 level gives way in the early morning hours in the States. The BOJ intervention is weakening the yen so the dollar/yen pair is moving higher, which moves the dollar basket higher, $USD, and in turn weakens the euro. The higher dollar slams commodities and especially copper. The Monthly Jobs Report, the last report before the presidential election, is released at 8:30 AM EST, with 171K jobs (above the 125K consensus) and 7.9% unemployment rate (consensus was 7.9%). Hourly wages are down and hours worked are flat. If companies are not paying higher wages to current workers, and the hourly hours are not rising, that tells you there is no need to hire any new employees, the existing employees are handling the workload fine. The 171K is positive news, but a recovery needs over 300K jobs per month. In addition, 150K jobs are needed to simply keep pace with potential new employees entering the workforce such as college graduates. The numbers are very worrisome. Futures bounce on the news but are not overly exuberant; the S&P’s are up about six, and also tech is not leading the broad markets higher. The jobs report hints that QE is perhaps less needed, even though a 171K number is nothing to write home about, along with the higher dollar, pushes gold under 1700. The euro drops to 1.2852. At the opening bell, the semiconductors bounce and then fall on their sword. Volatility, VIX, drops to 16 (market bullish) but then bounces strongly (bearish). Commodities are dropping on the higher dollar and copper is getting crushed. Dr. Copper, perhaps the main bellwether of the global markets, will need to treat his severe wounds this evening. The SPX jumps to punch thru Keystone’s SPX 60-Minute Chart with 200 EMA Indicator at 1432, but only for a few minutes, and also tests the 50-day MA at 1434. The SPX immediately collapses. The iPad Mini is on sale but the lines are far shorter than other Apple product releases. The Apple stores take on a surreal affect with employees performing traditional cheers for patrons, but, there are more employees than customers in the stores. AAPL is negative from the opening bell and tests the 200-day MA at 588, which fails. Apple drags down the Nasdaq. The euro drops to 1.2842 approaching the key 1.2830 level which is strong support and the 200-day MA. The utilities sector is weak. At 2 PM EST, the SPX loses the strong support at 1424. The euro falls thru the 200-day MA. Apple collapses now down 15 bucks. Small caps are collapsing with the RUT now down over one percent. The SPX drops to the strong 1419 support, and fails. Oil falls under 85. The VIX is over 17. The Dow Industrials have now dropped 200 points off of today’s high print. AAPL is down 20 bucks to 576. The news outlets are running video and stories on the Hurricane Sandy disaster non-stop. The devastation is overwhelming. The gasoline lines stretch on for miles. Folks continue to search for the missing. The help is slow in coming. The situation is deteriorating with each passing hour. Meanwhile, runners preparing for the New York marathon only yards away from devastation are in a festive mood, running practice runs since Mayor Bloomberg is resolute in holding the marathon. Even the marathon committee is not fully on board with this decision considering the human tragedy unfolding. Outrage develops when three large boxcar size generators are shown in place for the marathon; these generators could supply electricity to a few hundred homes instead. Truckloads of bottled water sit at the marathon staging grounds and even cases of booze are stacked ready for the drunks to drink during the festivities. Bloomberg buckles under the pressure and at 5 PM EST announces that the marathon is cancelled. New York, New Jersey, Connecticut and Pennsylvania, as well as other East Coast areas are a mess, perhaps all this confusion adding to the market weakness. The SPX loses 13 points, 0.9%, to 1414. The Dow Industrials lose 139 points, 1.1%, to 13093. The Nasdaq is down 38 points, 1.3%, to 2982. The RUT is down 13 points, 1.6%, to 814. The broad indexes finish flat to negative on the week. The markets gave back all of Thursday’s gains. Gold is at 1678. Tech, and the small caps, lead the markets lower today, which is bearish. The copper collapse is very bearish.
On 11/3/12, Saturday, the hurricane tragedy continues with the death toll now over 100. The situation continues to deteriorate but Bloomberg and other leaders pat each other on the back at how great a job they are doing. This fuels further outrage. Damages may now exceed 50 billion dollars. The tragedy is heart-breaking.
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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 but if the results are as close as anticipated it may be the wee hours of the morning before the victor is known.
On 11/7/12, Wednesday, the election aftermath. 10-Year Note Auction. Consumer Credit.
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.
Europe continues to dictate global market direction with several moving parts;
· ECB Rate Decision and Press Conference this Thursday, 11/8/12. Europe must lower the value of the euro to increase growth thru manufacturing and exports. If the ECB cuts, the euro will drop and bring down equities. If the ECB stands pat the euro will move sideways or up which will help support markets.
· The Spain bailout request must occur before the ECB OMT bond-buying program can occur. Spain must formally request the bailout since it shows a willingness to give up some sovereignty and accept oversight and conditionality. Spain are proud folks that do not want that so they keep trying to hang on without requesting a bailout. Italy tries to convince Spain to request the bailout since the bond-buying would help Italy’ debt mess. Rajoy continues resolute in not asking for a bailout, especially with Catalonia regional elections occurring on 11/25/12, and it appears Spain will not request a bailout until December or later. The euro weakens (equity markets weaken) with no bailout but will launch higher with a bailout request.
· Troika is scheduled to make a decision on Greece’s debt mess on 11/12/12 but do not hold your breath. The schedule has changed from August to September to October and now to November. The euro will weaken as the Greece mess continues but the euro will jump higher if a solution occurs, which would send equity markets higher as well. Greece will likely stay in the euro until the Merkel election occurs in Germany in the Fall 2013.
· Cyprus needs aid. Perhaps the European leaders are working on a package approach where a Spain, Greece and Cyprus aid package will be announce all at once.
· Italy, Ireland and other Euro nation’s ongoing individual debt drama’s.
· Fiscal Union and Banking Union. Merkel is pushing the fiscal union. The banking union is to start up January 2013 but will not be fully functional until January 2014. The schedules and dates continue to slip forward.
· The Draghi put supporting the markets is the announcement of the OMT program on 9/6/12 at SPX 1403. If SPX 1403 fails, that shows traders have lost all confidence in the European central bankers’ scheme.
· ECB Rate Decision and Press Conference Thursday, 12/6/12.
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On 11/12/12, Monday, Veteran’s Day Observed, stock market is open but bond market is closed. Troika is working towards a Greece decision for today (the decision has been repeatedly delayed from August).
On 11/13/12, Tuesday, NFIB Small Biz Optimism Index. New moon.
On 11/14/12, Wednesday, PPI and Retail Sales. Business Inventories. FOMC Minutes. Bradley turn date.
On 11/15/12, Thursday, CPI. Empire State and Philly Fed Surveys.
On 11/16/12, Friday, OpEx. TIC data. Industrial Production.
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On 1/1/13, Tuesday, ESM is officially open but will not be fully operational.
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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