Keystone's Trading Week in Review and Path Ahead for Markets 7/13/13

On Friday, 7/5/13, the futures remain elevated with the S&P +17, Dow +156 and Nasdaq +33. China will no longer report industry-specific data for the PMI. Obviously, this change serves to hide the ongoing weakness in the economy. Samsung S4 sales fall short of estimates and guidance is lowererd hinting that the high-end Smartphone segment is becoming saturated. German factory orders unexpectedly fall. Steven Cohen of SAC Capital is not charged with any criminal wrongdoing. The ECB and Fed central bankers warn traders to not react so dramatically based on every word said.  These are hollow words since these officials created the current marketplace conditions with their four-plus years of intervention.  An NYSE ARCA computer glitch occurs between 7:29 AM EST and 8:41 AM causing sporadic interruptions to the quote system. Futures drift lower as the morning proceeds. The Monthly Jobs Report is 195K jobs and the 7.6% rate remains unchanged, a Goldilocks report, not over 200K jobs to worry about the Fed tapering QE, while at the same time showing that the economy may be slowly healing. The futures catapult to the overnight highs again with the S&P +18, Dow +161 and Nasdaq +28. The U.S. markets reopen for trading after the holiday and leap higher.  The SPX moves up through both the 20-day and 50-day MA’s. Keystone’s 60-minute chart with 200 EMA cross and 30-minute chart with 8/34 MA cross signal bullish markets for the hours and days ahead. The SPX finishes the day up +1.0% to 1632. The Dow is up +1.0%, Nasdaq +1.0% and RUT +1.4%.  For the week, the SPX is up +1.6%, Dow +1.5%, Nasdaq +2.2% and RUT +2.9%. Tech and small caps lead which is a bullish signal for markets; however, the volume today is the second lowest of the entire year. The dollar index finishes at a 3-year high at 84.71. Treasury yields take the largest daily jump since 2010. The 10-year yield is at 2.72%; the highest level since July 2011. WTIC crude oil ends at 103.63 up +7.3% this week on the Egypt turmoil, the highest levels since April 2012. Brent oil nears 108. Gold is punished 39 bucks today ending the week at 1213.

On Saturday, 7/6/13, Egypt turmoil increases and turns deadly as the army opens fire on Mursi supporters. 30 people die in clashes throughout Egypt and fear is growing that a civil war is breaking out. A Christian priest is shot and killed. The Suez Canal is on alert but remains open and operating. Venezuela and Nicaragua offer asylum to Snowden, the U.S. whistleblower that exposed the spying that is occurring on all American citizens. San Bernardino, California, USA, continues to seek Chapter 9 bankruptcy protection from the courts.

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On Sunday, 7/7/13, Bundesbank head Weidmann says “the ECB cannot solve the Eurozone crisis.”  Greece and the Troika are in talks over additional funding.  The Egypt turmoil continues with over 40 people killed as the violence increases between anti and pro-Mursi protestors.

On Monday, 7/8/13, S&P cuts Japan’s Softbank ratings to junk. EU finance ministers meet in Brussels to discuss ongoing challenges including Portugal, Greece and Italy. Trade talks between the U.S. and EU leaders begin.  Germany industrial output data falls more than expected. On behest of the New York attorney general, Thomson Reuters decides to stop giving an elite group of trader’s early releases of data which are used by algorithms to gain a trading advantage.  The broad indexes start the week in a happy mood with S&P futures +9 all morning long.  Global bellwether DE receives a downgrade due to a slowing global economy. ECB’s Draghi reiterates his low rate strategy which sets a bullish tone for equities today.  The broad indexes jump higher at the open with the SPX into the 1640’s.  The bulls maintain control all day long with the week starting in favor of the bulls. After the close, AA kicks off Q2 earnings season beating by a penny on EPS with top line revenue in line. The ongoing lack of top line revenue growth for companies continues. The pre-announcement warnings and negative guidance for earnings are at the highest level since Q1 of 2001. Companies have lowered the bar so it will be easy to beat on earnings. Barnes & Noble (BKS) CEO resigns.

On Tuesday, 7/9/13, China inflation rises especially food inflation (food inflation always leads to social unrest in China). First of Ramadan. Violence continues in Egypt. Greece receives billions more in bailout money to keep this sinking ship afloat. European indexes are up about one percent across the board on the news. GS downgrades tech bellwether IBM. Companies are cutting back on IT spending which is not a good sign for the overall economy.  The NFIB Small Biz Optimism Index drops after two up months. Businesses are feeling less optimistic due to the stagnant economy with weak sales as well as increased regulation, taxes and Obamacare (new healthcare program) problems.  The markets open and leap higher like yesterday. The SPX attacks the strong 1649-1650 resistance.  JOLTS Report shows improvement in the number of job postings but employer hiring remains flat. The Fed announces more strict leverage requirements on the big banks.  The financials weaken on the news.  Rumors surface that hedge fund activist Ackman is securing wealthy investors to make a run at FDX. FedEx soars over 7% on the news and the Dow Trannies jump 4%. The broad indexes run higher all day long on light volume and end the day near the highs. The SPX is 1652, Dow 15300, Nasdaq 3504 and RUT 1018.  S&P rating agency cuts Italy’s debt rating to BBB and keeps this trouble nation on negative watch.   

On Wednesday, 7/10/13, China exports and imports unexpectedly drop. The IMF has lowered growth forecasts and it appears the emerging market slowdown with China, Brazil, India, and others, is more structural rather than cyclical.  Egypt violence continues as a new premier is appointed to help boost the economy and prepare for elections in six months.  EU unveils a plan to handle future bank failures.  The markets are flat all day long awaiting the FOMC Minutes.  At 2 PM, the Minutes are released that offer no new information. Equities oscillate up and down but maintain a flat posture into the closing bell. The Minutes are a non-event.  After the close, Chairman Bernanke says “the Fed will remain accommodative for the foreseeable future.” One-half of the FOMC members want to taper QE before the end of the year but Bernanke’s comments is what matters. The Fed will keep the QE money spigot open due to the high unemployment and low inflation.  Global markets immediately react. The dollar drops, gold, silver and commodities explode higher. WTIC crude oil hits 107. Gasoline prices in the States will likely take a big jump higher in the days ahead.  The S&P futures leap higher to +15 and Dow +150. The central bankers control the markets and the Fed’s number one mandate is to pump the stock market. China bellwether YUM reports lackluster earnings with lower profits and sells off AH’s.

On Thursday, 7/11/13, Australian unemployment rises to 2009 levels.  Japan will not add to their current stimulus targets. The euphoria over Chairman Bernanke’s “QE for the foreseeable future” comment sends Asian and China markets up +3% and European markets up over +1%.  Gold, silver and copper are up +3%. The dollar index drops to 83 sending the euro higher and dollar/yen lower. The S&P futures are +16 and Dow +140. Lenovo takes over the number one position as the top computer production company in the world.  In general, PC shipments fall for the fifth quarter in a row around the globe.  Jobless Claims spike higher but the futures are unaffected since bad news is now good news again.  The Fed will supply more crack cocaine to pump the markets higher if the data is bad.  The broad indexes leap higher with both the SPX and Dow  moving above their all-time respective highs at 1669 and 15409.  All the Dow 30 stocks are higher.  Seven-eleven is a lucky day for bulls. Short squeezes push equities higher all day long into the closing bell. The SPX prints a new all-time closing high at 1675.02 but not an all-time intraday high. The Dow prints a new all-time closing high at 15460.92 but not an all-time intraday high. The RUT prints a new all-time closing high at 1033.18 and new all-time intraday high at 1033.34. Traders are giddy over new all-time highs.

On Friday, 7/12/13, the China finance minister says growth may be under 7% for this year. S&P downgrades the Portugal bank sector. The Portugal 10-year yield starts moving higher now at 7.56%.  Egypt turmoil continues with the Muslim brotherhood calling for demonstrations today. Brazil tensions rise and protests turn violent with police using tear gas on the crowds. JPM and WFC kicks off bank earnings with both reporting numbers in line and the stocks move higher pre-market. Global shipping bellwether UPS drops bombshell news lowering forecasts due to a slowing world economy. If business contracts, parts and products are not shipping, that tells you the global economy is in sick shape. UPS drops over -5% pre-market and other shippers such as FDX fall in sympathy.  Market bulls do not care, however, since this means the Fed will pump more easy money crack cocaine into the markets’ veins. The stock market opens and drifts along the flat line with an upward bias un-phased, and perhaps encouraged by, bad economic data, as sick as this is. BA, a Dow component, drops -7% on news that a fire has occurred on a Dreamliner 787. BA creates about 40 Dow negative points on the news but trader’s slough it off since the Fed will continue to pump markets higher.  Fed’s Bullard and Williams speak contradicting each other but Bullard’s dovish comments carry far more clout and help create an upside market thrust into the closing bell. The Fed controls the markets. Volatility drops with the VIX falling under 14 creating upside market fuel.  The SPX prints a new all-time closing high at 1680.19 but not an all-time high. The Dow prints a new all-time closing high at 15464 but not a new all-time high. The Nasdaq closes at 3600 a 12-year high. The RUT prints a new all-time closing high at 1036.52 and new all-time high at 1038.27. For the week, the SPX is up +3.0%, Dow is up +2.2%, Nasdaq is up +3.5% and RUT is up +3.1%. Tech and small caps slightly lead the parade which is bullish but the two-week rally is purely the result of central banker intervention and Fed pumping. The Fed’s central mandate is to keep the stock market elevated. Trader’s voice concern over the China data coming on the weekend but past history shows that lots of negative hype occurs in front of the data release but the numbers are massaged to print better than the expected. The 10-year yield drops to 2.59% well off its highs. France is downgraded by Fitch to AA+ from AAA due to its excessive debt.  After the close, T plans to acquire LEAP so this may pump the telecom sector on Monday. Snowden, the whistleblower that informed America that they are being spied upon through computers and cell phones, is seeking temporary asylum in Russia until he can find safe passage to South America.

On Saturday, 7/13/13, unions, that were instrumental in passing the new healthcare law, now voice concern over Obamacare saying it will ‘destroy the middle class’. Obamacare is causing employers to reduce hours to avoid the high costs of the new program turning the U.S. into a part-time work force. The big jump in oil price due to the Middle East violence will hit American shores with higher gasoline prices. Gasoline has already jumped about one nickel over the last day and a price jump of from 10 to 30 cents is anticipated in the coming days. Fill your tank asap. Italy considers proposals to increase taxes on the wealthy. Italy’s fragile coalition government is becoming shakier each day as the economy continues to fall apart. Beppe Grillo says that Italy is headed for catastrophe and needs new elections as quickly as possible. Portugal 10-year yield hit 7.84% and settles at 7.51% exploding higher as economic turmoil increases. The bond market obviously recognizes that Portugal needs another bailout.

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On Sunday, 7/14/13, China economic data shows…..

On Monday, 7/15/13, Retail Sales. Empire State Mfg Survey. Business Inventories. C earnings.

On Tuesday, 7/16/13, Consumer Price Index (CPI). TIC data. Industrial Production. Housing Market Index. Fed’s George speaks. CSX, GS, JNJ, KO and YHOO earnings.

On Wednesday, 7/17/13, Housing Starts. Chairman Bernanke speaks (House testimony). Oil Inventories. Beige Book.  BAC, INTC, IBM, USB earnings.

On Thursday, 7/18/13, Jobless Claims. Chairman Bernanke speaks (Senate testimony). Philly Fed Survey.  Leading Indicators. Natty Gas Inventories. 10-Year TIPS Auction. GOOG, MSFT, PM, UNP, UNH, VZ earnings.

On Friday, 7/19/13, OpEx. GE, HON, IR, SLB earnings.

On Saturday, 7/20/13, …………..

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In September, the Debt Ceiling limit and CR resolution to fund the U.S. government deadlines occur.  Can the politicians reach an agreement during July and August to set the U.S. on the correct fiscal path to avoid disaster? The summer showdown is similar to the set-up in the summer of 2011 which resulted in a market crash. The Whitehouse scandals are distracting politicians from properly addressing the countries financial problems.

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

In Q4 2013, European bank stress tests will occur.

On Friday, 1/31/14, Chairman Bernanke’s term ends at the Fed, unless there is news during Q4 2013 that he will stay on. Will Yellen, even more dovish and likely wanting to see QE on steroids, take the reins?

On Friday, 2/7/14, Winter Olympics begin in Sochi, Russia, through 2/23/14.

In March 2014, the ESM is officially “fully operational.” The banking union schedule has been delayed from January 2013 to January 2014 and now to March 2014.