Saturday, October 12, 2013

Keystone's Trading Week in Review and Path Ahead for Markets 10/12/13

On Friday, 10/4/13, BOJ maintains current policy and says the moderate recovery continues. The Nikkei is down -5% this week. Italy considers expulsion of Berlusconi since he is convicted of tax fraud.   ADBE data is stolen by computer hackers. The Monthly Job Report is cancelled due to the government shutdown. The ADP Report has to serve as a proxy for now which disappointed on Wednesday. President Obama cancels a trip to Asia due to the ongoing political turmoil. Big banks are stocking up on cash for ATM machines in case the political situation grows uglier and folks run to the banks to withdraw cash. UNP reports weaker earnings so it is beaten -1%. The economy is anemic if rail cars are not hauling coal and other raw materials. The broad indexes run higher after the opening bell but Speaker Boehner steps to the microphone commenting on a newspaper article that says the democrats feel they have to do nothing to resolve the shutdown since they are ‘winning’.  Boehner erupts “This isn’t some damn game.” Markets drift a touch lower but the Fed’s regular morning market pump each day sends equities higher. The SPX trades flat in the afternoon through 1688-1692 ending at strong S/R at 1691.  The SPX gains 12 points, +0.7%. The Dow jumps 76 points, +0.5%, to 15073. The Nasdaq is up +0.9% and the RUT up +0.7%. Strong copper and financial sectors help the bulls while weak utilities, commodities and higher volatility help the bears.  For the week, the markets are mixed, the SPX is dead flat, the Dow drops -1.2%, the Nasdaq is up +0.7% and RUT +0.4%. Gold ends at 1310. In the evening, the Whitehouse announces that the Obamacare web sites will be down for repairs this weekend. The roll-out of the Obamacare web sites were a disaster this week due to the software malfunctions. No one is able to sign up for health insurance. Young folks are growing concerned, posting messages on FB voicing disgust, now realizing their health insurance costs will rise dramatically, double and triple; many realize that it will be far cheaper to simply pay a penalty and not carry insurance, even if they currently have insurance under the existing system. Hurricane Karen barrels through the Gulf towards New Orleans. Oil and gas rigs are shutting down and removing personnel ahead of the storm. LMT begins furloughing workers due to the which will increase each day the shutdown lingers.  Margin interest debt now surpasses the 2007 market top. Traders are borrowing to play the long side at the greatest level ever in the history of the markets. The major 2000 and 2007 market tops were identified by the high margin interest.

On Saturday, 10/5/13, the government shutdown is in day 5. The debt ceiling limit is only 12 days away. Both houses of Congress are in session with the House passing smaller spending bills to keep tourist sites and provide back-pay to furloughed workers. The president and Senate will not negotiate and say that all the House bills will be ignored.  U.S. special forces raid Al  Shabab and Al Qaeda terrorist strongholds


On Sunday, 10/6/13, Egypt violence increases on the 40th anniversary of the Israel-Egypt war with 51 dead. A typhoon hits China.  Workers return to the oil and gas rigs in the Gulf as Hurricane Karen peters out and ends in a heavy rain event. The budget standoff continues with both sides digging in.  President Obama refuses to negotiate but says he will after the House agrees to his demands of a clean CR and a higher debt ceiling limit (100% of what is asked for).  Speaker Boehner says the votes do not exist in the House to approve a clean CR bill and resolution cannot be reached until the president decides to become involved.  The baby talk from both sides continues. Global markets are now worried about slower growth in the U.S. The futures are weak with S&P’s -9, Dow -65 and Nasdaq -12.

On Monday, 10/7/13, Dollar/yen is lower to 96.94 reflecting a stronger yen which pressures equities. NIKK loses -1.2%. The World Bank cuts GDP forecasts for Asia. Japan awards a large airplane contract to Airbus and snubs BA, which will have a negative effect on the Dow today. Euro is 1.3582.  Pound/dollar is 1.6065. At 5 AM EST, global markets are under pressure with futures at S&P’s -18, Dow -140 and Nasdaq -31. The 10-year yield is 2.62%. Germany equities are down -1.2%. NBG (National Bank of Greece) leaps +16% as traders believe that Greece and Europe is on its way to a strong recovery. European markets and banks are all lower today except for Italy recovering after last week’s drubbing. Burberry warns on slowing China sales and continues to close stores but considers Indonesia a growth area and new luxury buyer. GS upgrades RLGY.  GS downgrades TOL which sends all the housing related stocks into a tizzy. CTB plummets -13% as the India Tyre deal develops a flat tire. The broad indexes drop like a stone with the SPX falling under the 50-day MA support at 1680. Commodities, oil and copper are all lower. The VIX catapults above 19 to levels not seen since June, verifying the market weakness today. The broad indexes move flat all day after the initial drop then collapse lower into the closing bell. Copper recovers and helps the bulls prevent significant market downside. The SPX loses 14 points, -0.9%, to 1676. The Dow loses 136 points, -0.9%, to 14936, under the 15K level. The Nasdaq drops 37 pints, -1.0%, to 3770. The RUT falls 12 points, -1.2%, to 1066. Tech and small caps lead lower today. TLM is up 5% today and bounces higher AH’s when Icahn announces that he is buying a stake in Talisman. The big boy insiders, not Joe Sixpack, make strong gains since they receive the word of Icahn’s position ahead of time. That is the way the game is played. After the bell, Alcatel-Lucent axes 10K jobs, 14% of its workforce. The Obamacare web site problems continue; the roll out of the new healthcare bill is a debacle. The Whitehouse is not releasing enrollment numbers.

On Tuesday, 10/8/13, China’s Shanghai Index begins trading again as the Golden Day holiday ends. Asian markets are higher across the board. Monte Paschi Bank cuts 3400 jobs and the stock pops +4%. U.K. retailers sell off from 1 to 4% on downgrades due to weakening sales. Day 8 of the U.S. government shutdown begins as creditors raise the pressure. The yields on one-month Treasury bills head higher showing that investors are becoming more nervous about the U.S. defaulting on its debt. Equities are not concerned about the government shutdown and pending debt ceiling limit since everyone is conditioned to expect an 11th hour stick-save where the political clowns will kick the can down the road and the stock market will pop 2 or 3%. There is no incentive for the politico’s to negotiate and reach solutions since the equity markets remain elevated and not concerned. China and Japan, the largest holders of U.S. debt, voice concern over the ongoing political turmoil. The broad indexes drop at the opening bell and move lower all day long. President Obama and Speaker Boehner talk on the telephone but Boehner says the president said he will not negotiate and wants an ‘unconditional surrender’.  Markets weaken further. The retail sector weakens. President Obama speaks in the afternoon in a rambling over one-hour press conference repeating all the same talking points—he will not negotiate. The soft democrat-friendly press does not ask one question about the Obamacare web site debacle ongoing. The broad indexes drop into the closing bell printing a very negative day. The SPX loses 21 points, -1.2%, to 1655. The Dow loses 160 points, -1.1%, to 14777. The Nasdaq loses 76 points, -2.0%, to 3695. The RUT drops 19 points, -1.7%, to 1047. Tech and small caps are clearly leading lower. The dip-buyers are pictured on a milk carton. The VIX options trade at record volume. After the bell, AA beats on top and bottom lines to kick off Q3 earnings season. AA pops +4% as it reaffirms guidance. YUM, a China bellwether, reports very weak results, a 68% profit drop, so the stock is pummeled -8% AH’s. President Obama will nominate Janet Yellen as the new Fed Chair tomorrow at 3 PM EST. Yellen has a very dovish reputation so junkie traders will be happy with a fresh supply of easy money crack cocaine on the way. Her confirmation process should not hit any snags. The president wanted Summers, and also begged Geithner to take the position a couple times, and then finally selected Yellen.  S&P futures pop +4 but it is not much of a bounce on the Yellen news.

On Wednesday, 10/9/13, copper and commodities weaken overnight. SAC Capital (Cohen) faces a $1.8 billion fine and must admit guilt to settle its ongoing legal problems. At 4 AM EST, S&P futures are +4 so there is not much of a Yellen rally on tap. MW jumps higher on a takeover bid by JOS but Men’s Warehouse does not ‘like the way it looks’ and rejects the offer. T plans to sell its cell towers to CCI. Equities are flat at the opening bell and then drift lower.  HPQ jumps +9% on encouraging remarks by CEO Whitman.  The broad indexes bottom at 11:30 AM and move higher into the FOMC Minutes which show that all but one member voted in favor of continuing QE. The Fed has a communication problem since they caused markets to believe that QE tapering would begin when that was not the case. President Obama nominates Janet Yellen as the new Fed Chair with Chairman Bernanke also attending. After the announcement, markets leak lower into the closing bell. The SPX is flat at 1656. The Dow is receiving a greater beating than the other indexes off the September market top with price testing, and bouncing off the 200-day MA at 14728. The Nasdaq weakness continues dropping -0.5%. The RUT drops -0.4%. Fidelity sells all short-dated U.S. debt ahead of the debt ceiling deadline. The government shutdown prevents death benefits from being paid to families of fallen soldiers—absolutely shameful.  The situation is being corrected quickly as news surfaces that the Whitehouse knew of this problem days ago but remained silent. Americans are growing impatient with the president and Congress. The Whitehouse is on record as saying they want to create pain for people to help create a push to solve the shutdown but these actions are greatly hurting and impacting average folks and are back-firing. President Obama opens the Mall to allow illegal immigrants to protest but continues to block access for Americans and veterans. It is a world gone mad. The veterans are now planning a Million Veteran March in the days ahead to reopen the monument sites. In the evening, President Obama announces a meeting with House republican leaders at the Whitehouse tomorrow to help resolve the debt ceiling limit. Futures markets jump higher.

On Thursday, 10/10/13, Asian markets are mixed with Nikkei up +1% and Shanghai down -1%. Radiation hits record levels at the troubled Fukishima nuclear plant. The radiated ocean water poses a health risk to the west coast of North America from Mexico’s Baja, to Canada and up to Alaska, but the main-stream media ignores the ongoing tragedy.  Japan’s machinery orders data are very strong. Brazil raises its interest rate. European markets are higher on positive debt ceiling meeting news. Libya’s Prime Minister is seized by revolutionaries.  The dollar popped strongly yesterday and the euro briefly fell under 1.35 this morning. The ECB and China agree on a currency swap deal which will help increase global use of the yuan (renminbi).  London is the leader in currency trading but Frankfurt may become a hub for yuan trading.  The government shutdown is in day 10 and the debt ceiling limit is only 7 days away. S&P futures are +12 on the perceived positive news of today’s Whitehouse meeting on the debt ceiling. Dow +80. Nasdaq +20. Oil is up and metals and gold are down.  Global finance leaders arrive in Washington, D.C., for G-20 and IMF meetings and are nervous over the ongoing U.S. political drama. At 7 AM EST, S&P futures are +17, Dow +130 and Nasdaq +29 as the market optimism increases.               Jobless claims explode higher but the data is quickly dismissed due to the impact of the government shutdown. FDX plans on hiring 20K part-time seasonal workers to help with the holiday season. Secretary Lew testifies before the Senate making the case that 10/17/13 is a line that should not be crossed.  The stock market catapults higher with the second strongest upside day of the year. Traders believe a shutdown and debt ceiling deal is imminent so shorts scramble to cover creating a wild upside market orgy. Volume is unimpressive, however, less than yesterday’s volume. All indexes across the board are up over 2%. The SPX gains 36 points, +2.2%, to 1693. The Dow is up 323 points, +2.2%, to 15126, and back above 15K. The Nasdaq is up 83 points, +2.2%, to 3761.  The RUT is up 26 points, +2.5%, to 1070. Note the uniformity in the upside percentages hinting that the day was fully controlled by the robot’s and algo’s. The upside move crushes the market bears as retail, financials, utilities and commodities sectors add bull fuel. Gold remains weak at 1288. At 4 PM after the closing bell, Speaker Boehner meets with President Obama at the Whitehouse and presents a plan to cleanly extend the debt ceiling deadline for 6 weeks but desires further negotiation to end the shutdown. Boehner also wants to begin negotiations on longer term debt reduction. Both sides said the meeting was ‘good’ although Boehner left the Whitehouse out the back door and did not comment in front of microphones. Negotiations continue through the evening. S&P futures drop -8 on news that Boehner left through the back door but recover to flat to down -3 when word came that both sides are talking into the evening. It is shameful that the unfree markets are completely news-driven, pulled to and fro purely by the political machinations. Polls show that 80% of Americans say the U.S. is on the wrong path forward.  President Obama’s approval rating drops to 37%, now under the 40% level. This is important since past presidents found it extremely difficult to recover once the approval rating drops under 40%. 5 in 10 Americans are blaming the republicans for the government shutdown while 3 in 10 are blaming the democrats.

On Friday, 10/11/13, the political negotiations continued late into the evening but it currently looks like a deal would not come until perhaps Monday. The Congress and president plan to negotiate through the weekend. Futures sit on the flat line.  Asian markets are up on news of the potential U.S. political deal. China auto sales are robust which is good news for F and others. European markets trend higher. The Royal Mail IPO in the U.K. catapults 40% on its first day of trading. JPM sells all of its short-term debt as the political mess continues. JPM earnings beat on EPS but are light on the top line. WFC beats by two pennies but is also light on the top line. The theme of lower sales and revenues continues this earnings season. The top line misses hint that the bank earnings next week may be challenged. GPS reports a big drop in sales as the apparel sector in general weakens. Folks are spending money on electronics and the monthly payments for Smartphone’s and cable but no longer have the discretionary dough to buy a sweater. MU shares plummet on weak sales and guidance and will hurt tech today. TEVA Pharma cans 5K employees, 10% of its workforce. Gold is halted from trading for less than one minute at 8:42 AM EST. A large selling block hits the gold market and price collapses over 30 bucks to 1264. The recovery rally continues with stocks moving higher all day long.  Refiners and home builders are up strongly. Fertilizers are weak and commodities are limiting the market upside. Bulls will need stronger copper and commodities to move markets higher. The SPX breaks up through 1700. Traders are optimistic that a political deal will be reached this weekend and expect an announcement on Monday morning.  PPI , Retail Sales and Business inventory data are all cancelled today due to the government shutdown. The Fed says it will be difficult to make determinations on QE tapering in the absence of data. Traders believe more and more that the Fed will not taper now until when Yellen assumes command from February 2014 forward. That means lots of QE easy money crack cocaine will continue to send the addicted markets higher through the end of the year so long traders buy fearlessly with both hands.  The SPX finishes up 11 points, +0.63%, to 1703.  The Dow is up 111 points, +0.7%, to 15237. The Nasdaq is up 31 points, +0.8%, to 3792. The RUT small caps explode higher by 15 points, +1.4%, to 1084. For the week, the SPX gains +0.8%, Dow +1.1%, Nasdaq loses -0.4% and RUT is up 0.6%. Tech is weak underperforming the broad market which is not a bullish sign for equities. Financials are a large user of tech and the tech weakness is in sync with the softness in the banks. The politicians are promising a bright shiny pony (a deal on the shutdown and debt ceiling limit) for Monday morning. The politico’s better deliver.                  


On Sunday, 10/13/13, China inflation and trade data shows…………

(Note: The economic data this week may be cancelled due to the ongoing government shutdown)

On Monday, 10/14/13, Happy Columbus Day. Stock Market is Open. Banks and Bond Markets Closed. The politicians promised a resolution to the government shutdown and debt ceiling limit this morning. Chairman Bernanke speaks in the evening.

On Tuesday, 10/15/13, Empire State Mfg Survey. Fed’s Dudley, Williams and Fisher speak.  C, INTC and YHOO earnings.

On Wednesday, 10/16/13, CPI. TIC data. Beige Book. Fed’s Fisher speaks. BAC, EBAY, IBM earnings.

On Thursday, 10/17/13, Fed’s Fisher speaks. Housing Starts. Industrial Production. Philly Fed. The nation reaches its Debt Ceiling Limit. Will the debt ceiling be raised to avoid a downgrade of U.S. debt? A large debt payment for social security is due 11/1/13 which creates one or two more weeks of wiggle room beyond today. Fed’s Evans, George and Kocherlakota speak. GOOG and GS earnings.

On Friday, 10/18/13, MS earnings. Fed’s Tarullo speaks. Leading Indicators. Fed’s Evans and Stein speak. In Q4, European bank stress tests will occur, Germany’s high court must decide if the ECB’s OMT program is constitutional, and Europe must finalize all plans for the new banking union.


On Tuesday, 10/22/13, AAPL unveils the new iPad.

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

On Wednesday, 1/29/14, Chairman Bernanke conducts his last official two-day meeting (1/28 and 1/29) as Chair of the FOMC.

On Friday, 1/31/14, Chairman Bernanke’s term ends at the Fed. Yellen takes over.

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

On Wednesday, 3/19/14, new Fed Chair Yellen talks at the conclusion of her first FOMC meeting (3/18 and 3/19).

In February/March 2014, the Fed Chair Yellen testifies before Congress.

In March 2014, the ESM is officially “fully operational.” The Euro banking union is in place after delays from January 2013 to January 2014 and now to March 2014.

In April, MSFT no longer supports Windows XP.


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


  1. oooops , they did it again :) .... that;s bullish for Monday LOL!


  2. I'm sick of this market man. I bought and sold my puts the day before the market had it's mini crash because it looked like the market was set to rally off the trend line. Then bought calls only to sell them when the SPX broke it's long term trendline the day before the market had it's biggest rally in a year, strictly on rumors. Now the market looks to retest that trendline again. It's enough to drive one crazy.

    KS, Any adivce on swing trading and managing P/L? I've been timing the market pretty well lately (with help from your site) except for last week. I took a massive hit on a few trades (2 of which were straddles that would have made an unbelievable return given the market swings) but I wound up selling the losing leg after the move to lower the loss only to have the market reverse direction, trapping my position. I think I just answered my question, have a trading plan and stick to it. Sorry for the venting, just fustrated out of my mind when I see the HUGE unrealized gains that should have been made compared to the HUGE loss that was realized.

    1. Sounds like your on the way to figuring ways to reduce risk. Simply thinking about things in the terms you describe shows you are on the right track. Decide on mental stops for your trades ahead of time and stick to these stops. As volatility (VIX) moves higher the market swings will become more and more violent, intraday and day to day. With all the indecision lately, it is usually best to let things simmer and trade less. Things are a coin-flip because of the political clowns. Earnings will become very important quickly and are not off to a good start.


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