Saturday, September 28, 2013

Keystone's Trading Week in Review and Path Ahead for Markets 9/28/13

On Friday, 9/20/13, India surprises markets by raising rates to try and protect their currency.  The new AAPL iPhone is on sale around the world creating small crowds.  Germany and Tokyo have very large lines. The gold iPhone is popular. Today is OpEx Quadruple Witching. The low CPC and CPCE put/call ratio’s continue to signal market complacency and a significant market top at hand. Stanley Druckenmiller, a well-respected and successful fund manager, comments on the inequality of QE saying it is “the biggest redistribution of wealth from the middle class and the poor to the rich ever.” The broad indexes bounce at the open but fall on their sword in quick order and drift lower. At about 10 AM, the utilities turn ugly dragging the broad indexes lower. At 11:30 AM, Speaker Boehner takes the podium.  The House passed a CR bill  to fund the government but the bill also requires defunding of Obamacare.  The Senate will not approve, and the president will veto, any bill that contains a defunding of Obamacare. In fiery comments, Boehner says “the American people don’t want the government shut down and don’t want Obamacare.” A software glitch surfaces with Obamacare which may cause serious problems with open enrollment in the health exchanges which is set to begin on 10/1/13 only 10 days away.  At about 1 PM, Fed’s Bullard says the Fed decision to not taper was a toss-up and that “the October meeting is ‘live’ (taper remains on the table).” Equities continue to weaken printing lower lows and lower highs into the closing bell. Traders are not so much concerned about the Bullard comment on a late October taper as much as they are at the mass confusion coming from the Fed. The Fed is floundering with lack of clarity and simply making everything up as they go along.  COL drops -6% as defense contracts dry up. NOC, GD and LMT all dump 2% in sympathy.  At 3:00 PM, BBRY is halted from trading on pending news.  BlackBerry reports earnings one week earlier and the numbers are horrible. In addition, BBRY is canning 4500 employees, about 40% of the workforce. Where are these folks going to find jobs? No where. BBRY reopens for trading at 3:30 PM and collapses losing -23%. The session ends with the SPX losing 12 points, -0.8%, to 1710 in the area before the Fed decision. The Dow loses 185 points, -1.2%, to 15451. The Dow rebalancing with the new additions, as well as Quadruple Witching, creates a huge volume surge. The utilities dump -1.5%. The 10-year yield is 2.74%. Gold retreats from its gains dropping -3.2% to 1325. For the week, the SPX is up +1.3%, Dow +0.5%, Nasdaq +1.4% and RUT gains +1.8%. Trannies gain +2.6% this week. Outperforming tech, small caps and trannies are bullish for the stock market but are these sectors rising because of a healthy economy or rising because traders know they should be rising if the economy was healthy so they simply take the Fed’s easy money and pump these asset bubbles higher? The Fed said Wednesday the economy is sick since there is no taper. At this point, the Fed is doing far more harm than good. At about 5 PM EST, President Obama calls Speaker Boehner to tell him that he will not negotiate on the CR bill. Looks like the spirit of cooperation does not exist as usual in the dysfunctional political system. Political pundits comment on how the president will negotiate with Syria, Russia, and now perhaps Iran, but not with the U.S. House. LNKD may have hacked client accounts to generate sales leads. AAPL iPhone sales receive a positive push today with initial sales numbers expected on Monday.

On Saturday, 9/21/13, Typhoon Usagi continues wreaking havoc across Asia and now targets Taiwan and the Philippines. The new AAPL iPhone’s are well received but the fingerprint reader may not work properly if the finger is wet and then the reader may take several minutes to reset. The iPhone user can always log in with their PIN code which is what the fingerprint reader seeks to eliminate. The Affordable Healthcare Act, Obamacare, is using ‘navigators’ to guide folks through selecting healthcare for the health exchanges opening in only 9 days. The navigators are only receiving 20 hours of training, not receiving any significant background checks, and will have full access to everyone’s addresses, social security numbers and all other personal information.


On Sunday, 9/22/13, a terrorism and a hostage situation is ongoing at a Kenyan mall with 39 dead and 150 wounded; some are Americans. Islamist extremists are targeting non-Muslims. Typhoon Usagi hits Hong Kong and then peters out as it moves across greater China.  Germany reelects Merkel and now there is no longer a need to keep countries like Greece or Cyprus in the euro, or even Germany itself.

On Monday, 9/23/13, China HSBC PMI is 51.2, better than expected, at a 7-month high, however, China imports drop which send copper lower. Crude oil is trading lower as Russia rejects any potential Syria strike. Angela Merkel is reelected for a third four-year term. Eurozone PMI is 51.1, lower than expected. The euro remains elevated at 1.3511. Draghi speaks in front of a Parliamentary Committee and stands ready to provide more stimulus perhaps an LTRO3. The Euro Stock 600 Index has the lowest amount of short positions in place since 2006 (traders are complacent across the globe).  C announces a 10% drop in revenues ahead which follows along with JEF negative news last week so the banking sector may be weak today. At 7 AM EST, explosions occur at the Kenyan mall hostage situation and the mall is on fire with 59 now dead. AAPL announces a blow-out 9 million sales number on iPhones far past estimates of 5 to 7 million. AAPL catapults 25 dollars moving above 490 pre-market. Shipping bellwether FDX is downgraded and drops -2%. Equities sell off to begin the week with the SPX losing the 1700 level mid-day. Stocks stabilize as Fed’s Dudley, a voting member, speaks dovishly wanting to see better economic data before beginning the QE taper. Financials are the weakest sector and this is troublesome for long traders since banks are expected to lead the broad indexes higher moving forward. Volatility climbs higher with VIX well above 14 again.  At about 2:30 PM, Fed’s Fisher says “the Whitehouse has terribly mishandled the process for picking the new Fed Chair.” Fisher says the next Fed selection process “should not be a public debate.” On Yellen, he says she is “wrong on policy but would make a great chairperson.” Equities drift sideways all day. Traders complain that the Fed talks out of both sides of their mouth and there is no leadership. Fed’s Dudley was dovish earlier in the day but Fisher was hawkishMarkets end down on the day but marginally, now weak for three consecutive days following the big Fed decision giving up the entire Fed rally. The sick financials raises concern. MS and C are down in excess of -3%. Biotech, a stalwart sector this year, sells off. Crude oil drops with WTIC at 103 and Brent at 108. AAPL is the bright spot finishing the day up +5% to 491 helping the Nasdaq. The Justice Department plans to sue JPM over mortgage bond shenanigans.  JPM’s lawsuit woes continue with the stock dropping on the news and creating further negativity in the financial sector. BBRY receives a bid to buy the company at $9 per share. Chrysler files for an IPO to slow down Fiat’s push to own the company. Fiat owns nearly 60% of Chrysler and is very unhappy with the news. RHAT earnings EPS is in line but top line revenue misses and the stock is punished -10% in AH’s trading. Hedge funds begin advertising on television to gain clients. Lois Lerner, the center of the IRS scandal investigation, retires after enjoying a paid vacation the last few months. Lerner pleaded the Fifth during Congressional Testimony to avoid answering questions and emails and other evidence contradict her initial comments. Congress will continue to dig deeper into the IRS scandal to find out who gave her instructions to target conservative and tea party groups before the presidential election.

On Tuesday, 9/24/13, South Korea does not select a winner for an 8 billion fighter jet contract. BA thought they were a shoe-in but S. Korea wants state-of-the-art aircraft due to N. Korea turmoil and the BA jets are slightly older technology. German business confidence misses expectations.  The euro drops on the news from 1.35. The 10-year yield is 2.68%. Copper is weak for three consecutive days. Senate Leader Reid calls the House bill, which includes the funding of 99.9% of the government but will defund Obamacare, dead on arrival. KBH and LEN earnings beat but both show orders actually decreasing. Copper collapses as the regular trading session opens. Equities are flat to lower to begin the day. Consumer Confidence is weaker than expected.  At 10:30 AM, markets place a bottom and then move higher on news that a rumor about an Italian debt downgrade was false. Gold is having continued bad luck down -13 to 1313.   President Obama speaks at the U.N. jabbing Putin saying that thinking the rebels launched the chemical attacks in Syria is an “insult to human reason.”  The SPX recovers from 1695 up to 1708 at 2 PM.  Senator Cruz from Texas begins a filibuster-type talk on the Senate floor at 2:40 PM EST pledging to “speak as long as I can stand.” Cruz is passionate about defunding Obamacare and is a republican presidential hopeful for the 2016 election. Markets sell off from 2 PM into the closing bell and end the day lower. The SPX drops under 1700 closing at 1697. Weak copper and financials drag equities lower. After the bell, CY a semiconductor company, drops -10% on lackluster guidance moving forward.  In the evening, Secretary Lew warns that investors may be too calm and optimistic about a positive debt-ceiling outcome and the deadline may be coming faster than thought within 3 weeks time. The $USD dollar index chart creates a death cross with the 50-day MA dropping under the 200-day MA.

On Wednesday, 9/25/13, Tokyo Electron and Applied Materials merge to create a 29 billion chip technology company. Alibaba abandons thoughts of a listing in Hong Kong and instead considers listing in the U.S.  Italian Prime Minister Letta warns on the risk of a U.K. exit from the European Union (EU). The U.K. is becoming concerned about a housing bubble. France business sentiment drops. The euro remains at 1.35. Cruz continues the Senate non-filibuster filibuster, now the 8th longest in history, reading Green Eggs and Ham by Dr. Seuss (as long as he remains standing he can say or read whatever he wants).  Secretary Lew says the government will run out of funds by 10/17/13 tightening the debt ceiling deadline. Markets trend sideways to begin the day. DB slides lower on weaker guidance another negative for banks. New Home Sales are better than expected.  At 12:25 PM, a large sell program hits the markets causing a 30-point drop in the Dow and a 4-handle drop in the SPX in only a couple minutes time.  Senator Cruz ends his non-filibuster filibuster at 21 hours and 19 minutes. Leader Reid calls the Cruz performance “a big waste of time.” At 1:30 PM, a rumor hits that WMT is cutting orders; the stock plummets and sends the Dow lower. About 20 minutes later, a Walmart spokesman says the order cutting rumor is ‘misleading’ since WMT is constantly readjusting orders and managing inventory with vendors.  WMT recovers to 75. If Walmart has inventory piling up on shelves and in back rooms, the many supplier companies stocking those shelves will be very negatively affected, as well as all the employees that work at these companies. Markets are in a tizzy over WMT into the closing bell. The markets close down on the day with the SPX at 1693. The RUT prints a new intraday high today at 1082.00 before pulling back to 1074. Small caps benefit to a great extent from the phenomenal biotech sector this year.

On Thursday, 9/26/13, European markets are mixed as Italy’s Berlesconi political drama heats up again. California raises the minimum wage to $10 per hour, the highest in the U.S. HTZ drives off a cliff losing -9% pre-market after lowering forward guidance. If the car rental business is falling off, business people are not meeting with customers and folks are not going on vacations.  GDP is 2.5% in line with estimates. Stocks move higher after the opening bell and the SPX is back above 1700. FB hits 50. FHA may need a first-ever taxpayer bailout to remedy the damage from the 2005-2008 housing debacle. Speaker Boehner takes the podium and says he does not want a government shutdown. President Obama says he will not negotiate over the CR. Boehner says, “I’m sorry, it just does not work this way.” The broad indexes weaken after Boehner’s comments.  JCP announces a stock offering which will dilute the stock price. The stock plummets -10% as traders complain that CEO Ullman said hours before that all was fine; this behavior may require an SEC investigation. JBL drops -10% after reporting lower earnings and guidance. The day ends with the SPX at 1699 and Dow at 15328. The U.S. and Iran conduct talks over the nuclear program; the first high-level talks between these two nations in 35 years. NKE earnings are a beat on EPS but the top line is flat. Companies continue to face challenges with sales and meet EPS by lowering employee head count and expenses. NKE margins are up so the stock catapults +7% higher. The CPC and CPCE put/call ratios continue to print uber low numbers verifying complacency and a broad market top at hand.

On Friday, 9/27/13, U.K.’s Carney says the recovery is strengthening which may indicate less need for stimulus. Worries continue over the U.K. housing bubble where London prices are up 30-40% in only 6 months time. S&P futures are weak at -4 at 4 AM EST. At 5 AM, S&P’s -6. At 6:30 AM, S&P’s -8. The threat of the government shutdown looms as the CR deadline on Monday approaches. The debt ceiling deadline is 10/17/13. An IPO comes to market, Violin Memory, VMEM, with loud boisterous applause at the opening bell. The joy fades quickly and the crowd goes silent as the stock plummets -16% on its debut. The broad indexes tumble lower at the bell with the SPX falling through 1690. Consumer Sentiment is lower than expected. LL dumps -11% as corporate offices are searched by the Fed concerning lumber origin, much like the raid on Gibson concerning their guitar wood.  GS and BAC are downgraded by Guggenheim. Weaker utilities and higher volatility sends markets lower. The VIX moves above 15 briefly. The financials continue to tease the XLF 20 level but the bulls hang on and send the SPX sideways at 1692. Keybot the Quant, Keystone’s trading algorithm, flips to the bear side at SPX 1689. President Obama speaks at 3:45 PM, fifteen minutes late from the planned time, and berates the House as usual repeating the mantra that he will not negotiate. The Washington dysfunction continues on all sides. Equities drop as the president speaks but then recover into the closing bell with the SPX ending at 1692. The broad indexes are down about one-half percent across the board today. The Dow is 15258. For the week, the SPX is -1.1%, Dow -1.3%, Nasdaq +0.2% and RUT +0.1%. Tech and small caps lead which is a bullish indication. Small caps are supported by the small speculative biotech stocks. AAPL’s 2-week rally boosts the Nasdaq.

On Saturday, 9/28/13, the House convenes to discuss the CR bill. Either the House approves the Senate bill, which is a clean bill that simply approves funding the government without any reference to Obamacare, which will be quickly approved by the president, or, the House will modify the bill by attaching a different stipulation than defunding Obamacare, such as delaying the individual mandate for the health bill for one year or making it law that Congress and all staff should be subject to Obamacare. How sickening it is for the politicians to ram the higher health care costs down everyone’s throat while they conveniently exempt themselves? The system is obviously broken.

On Sunday, 9/29/13, the CR Continuing Resolution deadline is tomorrow and the drama continues on the Sunday morning political talk shows.  Congress and the president are performing their last minute clown antics as usual. The debt ceiling limit is only 18 days away; 14 trading days.

On Monday, 9/30/13, EOM. EOQ3. Chicago PMI. The CR Continuing Resolution to fund the U.S. government deadline occurs this evening. Senate will not be in session until 2 PM EST today. Will the shutdown be averted?

On Tuesday, 10/1/13, Q4 begins. China and Asia PMI’sEuropean PMI’s. Construction Spending. ISM Mfg Index.

On Wednesday, 10/2/13, ADP Jobs Report. Oil Inventories. Chairman Bernanke speaks.

On Thursday, 10/3/13, Jobless Claims. Factory Orders. ISM Non-Mfg Index. Natty Gas Inventories. Fed’s Fisher and Powell speak.

On Friday, 10/4/13, Monthly Jobs Report. Fed’s Kocherlakota speaks.  European bank stress tests will occur in Q4. Also, now that the elections are over and Merkel is reelected, Germany’s high court must decide if the ECB’s OMT program is constitutional, or not.


On Thursday, 10/17/13, the nation reaches its Debt Ceiling Limit. Will the debt ceiling be raised to avoid a downgrade of U.S. debt?

----------------------------- 2014 ----------------------

On Friday, 1/31/14, Chairman Bernanke’s term ends at the Fed. Yellen and Kohn are candidates for the position, and perhaps Bernanke and Geithner as well. Summers had to bow out so Yellen appears to be the choice, however, the possibility of Bernanke extending his term, or Geithner riding in on a white horse to take the job, have to be placed on the table as well.

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

In February/March 2014, the new Fed Head testifies before Congress.

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.


© The Keystone Speculator. All Rights Reserved. 2012. 2013.


  1. US gov shutdown is obviously next step at the end of Monday

    Senate will reject this form of law or in the end Mr. Obama will veto the 1year ammendament related to obamacare.
    Starting Tuesday the Gov will shutdown.


    1. Yep V, it is all baby games. The House sends the new bill with the 1-year delay of Obamacare back to the Senate, so the Senate can convened today and early Monday to remove the stipulations and ping-pong the bill back to the House, but Senate says they will not return until 2 PM Monday. Both sides are playing the game where you do not want to hold the bag when time runs out. But the Senate may take heat for sitting around the next two days waiting for 2 PM Monday. If the Senate convenes and kicks a cleaner bill back to the House again, the House may then play a game to kick it back to the Senate not giving them time to handle the bill so they would get blamed. It looks like the American people are fed up and they blame democrats, republicans and President Obama. No one wants to compromise or get-along and that is due to lack of leadership at the top. The Sunday futures will be interesting this evening.

    2. ok KS.
      I'm not an US citizen so can't fully understand all this fillibuster talks.
      The main idea is that they are running out of time at the end of Monday.
      So the US gov. might be closed.
      But after Monday, on Tuesday and until 15.0ct.2013 ...why is so important 15.Oct.2013?

      I've heard that US Treasury will run out of available money. So US gov. structures being closed the true danger arise after 15.Oct ? That's the way situation might be understood?

      thank you,


    3. There are two deadlines in play. Today is the CR continuinig resolution. The CR funds the government and this is typically rubber stamped when it comes up since both sides of Congress have approved all the spending in the past and the CR funds all these new laws and giveaways. The republicans are attaching Obamacare stuff to stop this healthcare law from moving forward, that is the snag. So this is one thing, to fund the goverment.

      The 10/17/13 deadline is the debt ceiling limit. It is like getting the limit on your credit card raised if you have spent all the money up to your limit. Most countries do not have this, they typically spend money and it is understood that whatever they decide will always be paid for and handled. In the U.S., there is a limit that must continually be allowed to move higher to handle the ever-increasing debt burden. This is much more important since exceeding the limit will hurt U.S.'s status as the best house on the block, it will ruin the U.S.'s credit rating and may cause a decrease in the rating which would be disasterous. All fund managers have guidelines and you have to hold so much dough in safe investments as per their prospectus so a downgrade of U.S. debt will cause turmoil around the world.

      Perhaps the political posturing will play out now with the CR limit and the debt ceiling deadline in a couple weeks will go smoother? Or, it all goes down the rabbit hole.

  2. I think the market will first sell off, then until 2pm Monday, everything will turn around bullish up up up!
    Like you said, playing baby games, the gov't will never shut down!

    1. The snag, however, is that no one is talking to each other. The Senate and president want a clean CR bill, to simply fund the government and be done with it, but republicans want to attach things that will slow down or stop Obamacare health law. So Senate will simply strip out the Obamacare stuff again and send it back to the House. Neither side wants to cooperate and work things out. But, like you say, this afternoon they all may be slapping each others backs in agreement on a solution.

  3. October 15-18 is when government is expected to reach the debt limit. It is the third time this episode of the epic fiscal cliff trilogy will be unveiled. Coming this October. Previous fiscal cliffs 1 and 2 resulted in massive waterfall crashes.


    1. The August 2011 waterfall crash began after the downgrade of U.S. debt due to the political clown antics back then.

  4. Lotta action on deck.


  5. Does anyone here know what happen to oil and gold during waterfall crashes?

    1. Come on Anon, this is a technical analysis education site, obviously you can easily see for yourself by bringing up a chart. Go to and enter $WTIC for light crude, or USO or others, and click the weekly chart. Oil dropped with other commodities in the August crash but recovered, oil moves with equities. For gold, type in $GOLD, or GLD or other tickers. Gold dropped too. Perhaps it would be a dollar up, commodities down, gold down, copper down, oil down, equities down, euro up, Treasury's up (yields down) move if the large sell off arrives.

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