Keystone's Trading Week in Review and Path Ahead 1/19/13

On Friday, 1/11/13, Japan’s Abe announces a large stimulus package which weakens the yen and drives the dollar/yen higher. Commodities, copper and oil, however, move lower.  Trader’s are abuzz about the strong inflows into ETF’s and funds, however, it is the start of the year where that would be expected. American Airlines say 16.5K applicants applied for 450 job openings; that’s about 40 people fighting for each job. Do you think the 25 million people in the U.S. that are unemployed and underemployed are felling pain? Of course they are, and this will likely create structural economic problems for the U.S. moving forward for years to come.  WFC earnings beat on the bottom and top line but not a blow-out beat which is what Wall Street wants to see.  WFC stock moves lower and does not supply the bullish happiness that long traders hoped for this morning.  The banks in general take on a negative tone as does the markets.  BA (Dow component) is down pre-market due to the continued negative 787 news. The holiday PC sales are weak ending the decade long positive upswing year after year. The shift from desktops to mobile computing (Smartphones, tablets and laptops) is clearly taking hold. The broad indexes recover the downside today, rallying from 11:30 AM forward just like yesterday. Fed intervention bounces the broad indexes each morning.  The SPX closes stone-cold flat on the day remaining at the strong 1472 S/R. For the week, the broad markets are up about one-half percent. The tech sector led the upside although AAPL is languishing sideways. The small caps lagged the major indexes all week hinting that the big upside last week in small caps was more due to short-covering rallies on speculative stocks.  After the bell, Senate democrats send a letter to the president urging him to take any steps necessary to avoid the debt ceiling limit regardless of what Congress does, which includes considering invoking the 14^th Amendment, or minting a trillion dollar platinum coin.

On Saturday, 1/12/13, the Fed says the oddball ideas about minting a coin or using the 14^th Amendment are not on the table. The political circus continues.

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On Monday, 1/14/13, oil and copper are up overnight keeping the futures buoyant until the WSJ says orders for iPhones and components are weakening. This places a cloud over the markets and AAPL falls under 500 pre-market.  Eurozone production data is unexpectedly weak.  The markets open and drift sideways to sideways lower.  The 10-year is at 1.85%.  AAPL falls under 500 at the opening bell but recovers. Apple is now exploring levels not seen since February 2012, about one year ago.  The president speaks at noon time repeating that there will be no negotiation over the debt ceiling and if something happens it is all the republicans fault. The president says he will not allow the republicans to hold the country hostage. Same old stuff. The political baby talk on all sides begins again.  During the speech, the president refers to himself as a “big spending socialist” (in the context of what he says others call him), an odd thing to say, and certainly will not help his argument.   Markets have a downward bias all day and then bounce to the flat line in the afternoon when a potential buy-out of DELL is announced exciting the bulls.  Chairman Bernanke talks after the markets close repeating the same old words.  Secretary Geithner chimes in and both Fed heads proclaim doom and gloom if the debt ceiling limit is not raised.

On Tuesday, 1/15/13, oil is weak.  The euro falls in the morning on weaker than expected German GDP. Fitch warns that a U.S. debt a downgrade may occur if the debt ceiling talks become problematic.  The Retail Sales data is slightly better than expectations and PPI is in line. The S&P futures are down six going into the open and the broad indexes are looking tired.  The markets languish sideways all day long and finish the day at the strong 1472 S/R.  Keystone’s SPX 30-minute chart shows the 8 MA stabbing down thru the 34 MA signaling bearish markets for the hours and days ahead, however, by the end of the day, the 8 MA crosses back above the 34 MA signaling bullish markets for the hours and days ahead. The markets remain indecisive moving sideways.

On Wednesday, 1/16/13, Germany’s Juncker warns that the euro appears too elevated and the European economy remains weak. European auto registrations and sales plummet. Even Germany’s VW sales are lackluster. The World Bank cuts 2013 growth forecasts. Another BA 787 problem occurs with smoke in the plane and pilots are shown sliding down the emergency chute. BA stock is hit hard. Anglo-American platinum mines are having labor issues which are spreading to other South African miners.  JPM earnings are in line and GS earnings are a huge upside blowout. The markets continue the ongoing sideways malaise and the SPX ends the day at the strong 1472 S/R. eBay reports strong results after the closing bell.

On Thursday, 1/17/13, BA’s 787 bucket of bolts is grounded in the U.S. and Japan. The Fed says it is concerned about the elevated stock and bond markets. This is odd since the Fed is creating the problem. ASML, the European chip machinery maker, announces weak earnings and outlook. Chips are in most everything we touch daily so reduced need for chips is not a healthy economic sign, however, as the day continues the long traders buy anyways. BAC earnings are such a mess of ex-items that analysts have a hard time assessing the results. C clearly misses on the bottom and top lines. Both banks trade lower. Housing Starts are 954K, levels not seen since July 2008, very optimistic for the housing recovery. The oil, commodities and copper markets leap higher and the S&P futures are up strongly to begin the day. Housing and auto’s are the two main users of copper. Lower Jobless Claims also signal an improving employment picture.  A rumor circulates that the republicans will not pursue a debt ceiling standoff so the markets bounce higher. The political market pumping machine starts again with a solution coming for the debt limit so traders turn strongly bullish. The markets are simply a QE money-pumping casino with spurts of political go juice added for good measure. Traders see no reason to buy protection against a market downdraft since the politicians will meet all deadlines moving forward, continuing to kick the can down the road, but not causing any market turmoil. The markets have zero downside priced in for any political problems moving forward.  Philly Fed is far weaker than expected but traders are ignoring bad news. The markets move higher all day long with the SPX printing an official five-year high touching 1485.  The RUT and Trannies are at all-time highs. The markets are whipped into a bullish euphoria today.  WTIC oil jumps to 96 moving up on the Algerian hostage situation. The situation is working towards resolution so the geopolitical premium to leak back out with oil dropping towards 95. Equities are moving in the same direction as oil. The euro/yen pushes thru 120 and the dollar/yen thru 90 as the BOJ weakens the yen.  INTC earnings beat on the bottom line but miss by a hair on the top line, providing weak forward guidance, and INTC is sold off strongly after hours. This will affect the tech sector tomorrow.

On Friday, 1/18/13, China GDP is 7.9% reversing the seven-quarter down trend. Oil, copper and commodities markets move higher on the news as well as the Aussie miners. U.K. retail sales are much weaker than expected. OpEx today. GE, a global bellwether, beats on earnings.  GE’s CEO Immelt is providing the president business advice daily, and likely washing his car each weekend, which results in lucrative government contracts.  MS also beats so the bulls are further encouraged. CAT receives an upgrade, no doubt due to positive China GDP, which now sets the long traders on an unstoppable path higher.  Consumer Sentiment is 71.3, the lowest reading since December 2011, but all bad news is ignored now in the markets, the sound of the negative sentiment data is muffled due to all the popping champagne corks on the trading floor. The money, and booze, is flowing like water. A late-day melt-up occurs into the close where the SPX prints new 2013 and multi-year highs at 1485.98. The RUT and Trannies (TRAN) are at historic highs. Strong transportation stocks and small caps are a very bullish indicator.  The volume picked up strongly on Thursday and Friday as well, another feather for the bulls cap. A three-day holiday weekend begins. The SPX is up one percent this week. AAPL drops 4% this week closing at 500, but the broad indexes move higher anyway. Late Friday night, under the maximum cover of darkness, CAT releases news of accounting misconduct at its China operations. Part of Friday’s market rally was due to the upgrade of CAT in the morning and rosie talk about blue skies ahead.

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On Sunday, 1/20/13, BOJ provides a stimulus plan that will continue to weaken the yen over the next couple days. The global currency wars are firmly underway.  Germany Lower Saxony elections are scheduled.

On Monday, 1/21/13, U.S. Markets are Closed in Observance of Dr. Martin Luther King Day. Presidential Inauguration.

On Tuesday, 1/22/13, U.S. Markets Open for Trading. Existing Home Sales.

On Wednesday, 1/23/13, World Economic Forum begins in Davos.  AAPL earnings. A political vote should occur this week to extend the debt ceiling.

On Thursday, 1/24/13, China Flash PMI. Jobless Claims. PMI Manufacturing Index 8:58 PM.

On Friday, 1/25/13, New Home Sales.

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On Monday, 1/28/13, ….

On Tuesday, 1/29/13, FOMC meeting begins. Consumer Confidence.

On Wednesday, 1/30/13, GDP. ADP Jobs Report. FOMC Rate Decision.

On Thursday, 1/31/13, EOM.

On Friday, 2/1/13, Monthly Jobs Report. ISM Mfg Index. Consumer Sentiment.

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On Tuesday, 2/12/13, President Obama’s State of the Union address.

In February, the 16.4 trillion Debt Ceiling hits. (a vote during the week of 1/22/13 may extend the debt ceiling deadline)

In February, Italy elections.

In February or March, the National People’s Congress convenes.  China President Xi Jinping and Premier Li Keqiang take over complete control and the ten-year transition of power is finished. China now sets inflation and budget targets moving forward. China will push to a domestic-led economy, private consumption, rather than an export-led economy, but a domestic economy will grow at a slower pace. The GDP projections are of particular interest, 2012 grew at an average 7.8% rate.

On Friday, 3/1/13, the Sequestration hits with one trillion in automatic spending cuts for government.

On Wednesday, 3/27/13, the Continuing Resolution (CR) is required to fund the government.

In March and April, the BOJ head’s will be replaced so stronger QE will continue. Perhaps a low in the Nikkei in January or February may provide an attractive entry for a long trade once the money-printing begins (weaker yen) in earnest.

In September, Merkel (Germany) seeks re-election and will not want to see Greece exit the euro before the election but will not care afterwards. Perhaps Greece and Germany will both exit the euro in the future.