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.
---------------------------------------------------------------
On Sunday, 7/14/13,
China walks
back the talk about sub 7% growth last week. The China economic growth data is
in line with estimates at 7.5%. The data
is massaged, as expected, to manage the markets. Actual China growth is more likely at 4 to 6%. Interestingly, a decline
in domestic consumption occurs, the exact opposite of what China needs. Asia
markets move higher on the news with basic materials stronger.
On Monday, 7/15/13, India’s inflation is running hot at near 5% annual rate. Merkel says “Germany can only prosper if Europe is doing
well.” Polls show that Merkel should win
the election in two months. Hollande says the ‘French recovery is here’.
Ditto Rajoy that says Spain can ‘see
light at the end of the tunnel’. Hold back your laughter since both of
these nations remain in dire economic trouble.
Leaders are simply trying to instill confidence. Germany
says the EU proposal on the bank resolution is unrealistic and lacks legal,
political and economic reality (Germany is not willing to give up any
sovereignty and become liable for debts of other countries). U.K. house prices rise to a record high
jumping 3% over the last month creating concern over a housing bubble. Egypt’s Muslim
Brotherhood calls for mass protests as a new cabinet forms. Earnings season kicks into high-gear
with one-third of the Dow stocks
reporting this week. C earnings beat
which provides a lift to markets setting a positive tone. Retail Sales are weaker than expected. BBRY slashes cell phone prices as early
trends show folks returning the BlackBerry Z10. MSFT cuts tablet prices. Price cuts are deflationary trends. Traders ignore
bad news since it simply means the Fed will supply more crack cocaine easy
money to pump the stock market higher. The
markets drift sideways to sideways up in a low volume up day. The SPX prints a
new all-time closing high at 1682.50 but not a new all-time
intraday high. The Dow prints a new all-time closing high
at 15484.26 but not a new all-time intraday high. The Nasdaq
is at 3607. The RUT is pumped +0.6%, 7 points to a new
all-time closing high at 1043.30 and new all-time intraday high at 1043.92.
Traders are chasing into small caps thinking that if the economy is recovering,
growth stocks should be favored. Utilities
bounce a strong +1.6% on lower Treasury yields with UTIL closing at 506. Volatility, VIX, remains under 14 so the
bulls keep equities elevated.
On Tuesday, 7/16/13, Japan’s Nikkei is up but the dollar/yen remains under 100 at 99.58. European auto sales fall -6.3% over the
last month to a 17-year low. Folks
cannot buy cars with record unemployment. German
investor confidence falls for the first time in three months. The Germans
grow more concerned over U.S. spying since they know first-hand about what happens with a totalitarian
government. Rajoy faces corruption allegations from cash payments in 2008-2010
but he vows to fight the charges and says
he will complete his term. The Euro politics become a deeper quagmire. Euro is
1.3080. U.K economic data is weak
so this will open the door for more
easing from Carney (bad news is good news) and the pound/dollar currency
pair falls to 1.5080. European equity markets are negative. KO
earnings miss and guidance drops due to a slowing global economy so the
stock is hit pre-market. GS and JNJ beat
on earnings and both stocks move higher pre-market. Consumer Price Index (CPI) continues to show a
lack of inflation. TIC data shows continued less foreign interest in buying U.S.
debt. The markets begin the day flat and
then weaken as the day continues. Fed’s George speaks hawkishly which creates further
market downside but this is not surprising since she is a hawk. Markets drift lower into the closing
bell and finish down on the day stopping
the three-day streak of new all-time closing highs. After the bell, YHOO earnings are in line with
estimates and CSX beats. Healthier
rails will encourage the coal sector. CTAS
earnings are lackluster showing lack of demand for uniforms which indicates
a sick, slow-growth economy where hiring is not occurring.
On Wednesday,
7/17/13, BAC earnings beat on EPS but miss slightly on the top line revenue.
Treasury
Secretary Lew speaks at 8:30 AM and says he will speed up the implementation of
Dodd-Frank. Chairman
Bernanke’s comments are released ahead of his testimony and immediately create a six-point bounce in the S&P
futures. The Fed supplies the crack cocaine feeding the equity markets. The
central bankers are the markets. The 10-year yield drops from 2.54% to 2.49%. Housing Starts are
weaker than expected and Mortgage Applications
continue a downward trend but long traders embrace bad economic data
since it means more Fed easy money in these twisted markets. Equities jump
higher at the opening bell. At 10 AM, Chairman Bernanke’s testimony is delayed due to
a microphone problem. During the easy
Q&A, Bernanke talks dovishly keeping the stock market buoyant. Perhaps
the Senate tomorrow may ask more challenging questions. In the afternoon at 2
PM, after the release of the Beige Book, markets drift lower but end the day on
the plus side. The SPX finishes at 1681 and Dow at 15471. TSLA
collapses over -15% and closes down -7.5% on a downgrade by GS. Ironically,
Tesla was just added to the Nasdaq so if this Elon Musk electric car maker
stumbles it will only serve to hurt the Nasdaq moving forward. After the bell, INTC earnings are weak and projects a
slump in PC sales due to a lack of cap ex spending (businesses are not buying
computers since they are not hiring) so the stock is sold off. AXP
also misses and drops in the AH’s. IBM beats on EPS, misses on the top line,
but reports strong guidance and is rewarded with a big bounce. EBAY
disappoints and is sold off -5% AH’s. Nelson Peltz, a hedge fund guru,
announces a large position in DD (paint
and chemicals). Obviously he is banking on a strong global economy since
chemicals, resins and paints are the building blocks of a global recovery,
however, the DuPont charts are weak as well as global economic data. Jim
Chanos, a hedge fund guru, and the largest short-seller in the world, voices concern over CAT since China and mining
sector weakness should continue to hit this stock moving forward, and the
descending triangle on the weekly chart reinforces this view.
On Thursday, 7/18/13,
the BOJ weakens the yen and, along with the
stronger dollar, sends the dollar/yen
back up and over 100 and the Nikkei strongly higher. The remainder of Asia
markets, however, are lower, as China weakness starts to cut deeper into the
surrounding Asian economies. Samsung is sold off -3% due to INTC
weak earnings last evening. SAP (tech) cuts software outlook for the entire
Asian region amid a weakening global economy.
Ericson (cell phones) reports weak sales and guidance. AKZO, a huge chemical company, reports a
weaker global economy moving forward (contradicting Peltz’s view on DD yesterday). ECB’s Asmussen says the ECB is not an
all-purpose solution to all problems. German Finance Minister Schauble visits Athens as austerity fatigue
causes continued rioting in the streets. Germany offers money to aid Greece but
the offering is very low and only serves to fuel resentment by Greece citizens.
A nationwide heat wave continues in the U.S. with oppressive humidity four
consecutive days. MS and UNH earnings
beat and set a happy tone. VZ
earnings miss but traders ignore bad news. Markets open and in quick order the Dow, SPX and RUT all
print new all-time highs. Chairman Bernanke provides testimony in front of the
Senate and it goes smoothly as politico’s
toss soft ball questions. The
markets finish the day with the SPX printing a new all-time intraday high at 1693.12 and
new all-time closing high at 1689.37. The Dow prints a new all-time intraday high
at 15589.40 and new all-time closing high at 15548.54. The Nasdaq is at
3611 and the RUT prints a new all-time intraday high at 1052.46 and new all-time
closing high at 1050.27. After the closing bell, GOOG and MSFT both miss earnings and take the
pipe each dropping -5% or more. The burrito business is good as CMG reports strong earnings and its
stock pops over +6% in AH’s. Detroit files Chapter 9 bankruptcy so the courts
will make some tough decisions over the
next month. Bond holders, businesses, individuals, pension-holders, city
services, and everyone in Detroit will suffer from blind politicians that
did not lead a transition from automobiles and Motown into the new economy. The
real estate data shows that house
flipping is in vogue again. Hedge funds continue to buy up any available
property thinking they will make a killing in the rental and resale market over
the next couple years. Traders are
tripping over themselves to buy RLGY, Realogy, the latest hot-shot mortgage
stock. All this behavior rhyme’s with the housing bubble topping action and
trouble in 2005-2007. BA leaks
slightly lower in the AH’s as a Japan Dreamliner has to dump its fuel and return
to the airport after receiving an emergency warning light. Thank you for flying
Bucket-o-Bolts Airlines. Business grow
more pessimistic over Obamacare with two-thirds saying the new healthcare law
makes it less likely that they will hire new workers. The CPC and CPCE
put/call ratio’s signal uber complacency in markets. Traders are fully convinced that markets cannot sell off anymore
because of the Fed’s support. Low
put/calls indicate that a significant market top is at hand.
On Friday, 7/19/13, Asian markets are weak in light of the GOOG and MSFT
earnings disappointment. G-20 leaders meet in Moscow. Italy’s ruling coalition is fraying as the finance minister says the economy will turn
around this quarter. Spain protests turn
ugly as rioters clash with police. Merkel says stabilizing Europe will take
years. Treasury Secretary Lew urges
Europe to spur growth. Today
is OpEx. Bellwether GE earnings
beat on EPS but miss on top line revenue. HON beats and guides higher. China will allow
banks to set lending rates, a major policy change, which immediately sends
futures higher from negative to flat. The markets drop at the opening bell but volatility is crushed hinting that
markets will recover. Sure enough, the drop
in the VIX allows markets to recover to the flat line. The Fed can
stick-save the markets by crushing volatility. The SEC files a civil law
suit charging SAC’s Cohen with failing to properly supervise traders. The
intent is to push Cohen into a family fund situation where he will not trade
with client’s money ever again. MSFT is beaten mercilessly today losing -11%. The SPX finishes the day at a new all-time closing high at 1692.09
but not a new all-time high, up +0.7%
this week. Equities receive the expected push this
week from Chairman Bernanke’s Congressional testimony. The Dow is up
+0.5% this week to a new all-time closing high at 155543.74 and new all-time
intraday high at 15589.40. RUT (small caps) print a new all-time closing high at
1050.48 but not a new all-time high, up +1.35% this week. The Nasdaq is down
-0.4% this week. Trannies are printing new highs with the Dow
Industrials which is bullish from a Dow Theory perspective. Small caps are
leading higher which is bullish but tech is sick which is bearish and indicates
potential trouble ahead for financials. Traders are likely chasing into small
caps since they perceive a new bull economic cycle beginning, which would
typically be a smart play, however, the economic data shows the opposite, and
it may be a case of the tail trying to wag the dog.
On Saturday, 7/20/13,
G-20 leaders pledge to emphasize growth
over austerity moving forward. PBOC says China’s
growth this year will be around 7.5% amazingly
(said cynically) the same number that they predicted months prior. A bomb explodes at Beijing airport.
-----------------------------------------------------------
On Monday, 7/22/13,
Existing Home Sales. Listen for any political posturing
ahead of the August recess for Congress.
On Tuesday, 7/23/13,
2-Year Note Auction (important for 2-10 spread).
On Wednesday,
7/24/13, Flash PMI’s. New Home Sales. Oil Inventories. 5-Year Note Auction.
On Thursday, 7/25/13,
Jobless Claims. Durable Goods. 7-Year Note Auction.
On Friday, 7/26/13, Consumer
Sentiment.
----------------------------------------------------------
On Monday, 7/29/13,
Pending Home Sales.
On Tuesday, 7/30/13, FOMC Meeting begins. Consumer
Confidence.
On Wednesday,
7/31/13, EOM. ADP Jobs Report. GDP.
Chicago PMI. Oil Inventories. FOMC Meeting
Announcement.
On Thursday, 8/1/13, BOE Rate Decision. ECB Rate Decision and Press Conference.
Jobless Claims. PMI Indexes. ISM Mfg Index.
On Friday, 8/2/13, Monthly
Jobs Report. Personal Income and Outlays. Factory Orders.
---------------------------------------------------------
On Monday, 8/5/13, ISM
Non-Mfg Index. Congress is in
recess until 9/6/13. Watch for potential market turmoil late July
and as August begins as politicians rattle swords ahead of vacation.
---------------------------------------------------------
In September, the Debt Ceiling limit and CR resolution to fund the U.S.
government deadlines occur. Can
the politicians reach an agreement within 9 weeks, while they are on vacation
recess for 4 weeks during the month of August? The Whitehouse
scandals and Obamacare problems 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.
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