Saturday, October 19, 2013
Keystone's Trading Week in Review and Path Ahead 10/19/13
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. The shutdown is in day 11 and the debt ceiling limit is only 6 days away. 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 Saturday, 10/12/13, President Obama rejects all the House ideas that appeared so promising last week and reestablishes his ‘no negotiation’ stance. The Senate repeats the same line that negotiations to control the budget cannot occur until the House passes a bill to reopen the government and raise the debt ceiling. The House republicans say the president is performing bait-and-switch tactics and not bargaining in good faith. The politico’s are back to square one so the theatrics will continue into next week. The Obamacare roll-out of health care is plagued with problems. A Kansas senator says not one person in his State has been able to sign-up. The IRS scandal deepens but democratic politicians are treating it as a joke, calling it a witch hunt. Asia is hit with severe storms including Cyclone Phailin moving across India, Typhoon Nari approaching Vietnam and Typhoon Wipha spinning in the Pacific Ocean.
On Sunday, 10/13/13, national parks such as the Grand Canyon reopen in several States but the individual States are footing the cost. Veteran’s and Tea Party folks descend on Washington and start physically removing the barriers to the national monuments. The shutdown is hurting the U.S. economy and destroying people’s confidence as the holiday retail season approaches quickly (Christmas is 10 weeks away). A poll shows that Americans are completely disgusted and fed up with Washington with 60% of Americans wanting to vote every single current politician out of office. China inflation and trade data is weaker than expected with exports dropping off reflecting weak economies in Europe and the U.S. China calls for a de-Americanized world moving forward. The U.S. will suffer it’s coveted reserve status (dollar is universally used for transactions around the world especially commodities) is lost in the coming years. The Chinese yuan (renminbi) hits record highs over the last few days against the dollar. IMF’s LaGarde warns of dire consequences if the U.S. does not resolve the budget drama. The Senate talks on resolving the budget situation break down although Leaders Reid (democrat) and McConnell (republican) talk positively. The Sunday evening futures markets drop dramatically with the S&P’s -17, -1.1%, the Dow -132 and Nasdaq -27.
On Monday, 10/14/13, politicians Reid and McConnell voice encouragement over a budget solution this week but the futures remain weak. S&P’s -12. Dow -100. Nasdaq -15. Today is Columbus Day so the stock market is open but the bond market and banks are closed. The shutdown is in day 14 and the debt ceiling limit is only 3 days away. The politicians promised a resolution to the government shutdown and debt ceiling limit for this morning but deliver nothing. Instead of a bright shiny pony, a donkey arrives on Wall Street honking ‘no deal, no deal. The weak China data keeps the Asian markets flat to negative overnight. Tokyo, Hong Kong and Indonesia markets are closed for holidays. China and India inflation is spiking higher especially higher food costs in India. Dr. Marc Faber, colorful analyst from the Doom, Boom and Gloom Report, says there are no safe havens these days and to stay diversified since all asset classes will likely drop moving forward. Before the opening bell, S&P’s -13, Dow -110 and Nasdaq -19. Gold is 1284 after filling the gap at 1263-ish last week. Dollar/yen 98.11. Euro 1.3589. Markets drop like a stone as the new week of trading begins. The SPX drops to 1692 support and bounces. WHR, a bellwether for housing, says sales are softening and the stock is hit -7%. COH is downgraded. Equities recover all day long as Senate Leaders Reid and McConnell say they are nearing a political deal. The SPX jumps to 1710 and equities are at the highs of the day as a meeting is announced for 3 PM at the Whitehouse between President Obama and Congressional leaders. Traders anticipate a deal announcement and push the stock market higher. At 2:45 PM, the Whitehouse meeting is postponed so equities drop; the SPX sinks 4 points to the strong 1706 support. Obviously, the stock market moves based solely on the current political theatre and the Fed and global central banker intervention; economic data and fundamentals be d*mned. Senator Reid says ‘tremendous progress’ is occurring so the markets rise into the closing bell with the SPX ending at critical 1710 resistance. The major indexes are all up a tight +0.4% to +0.6% showing that the algo’s and robots are trading the markets moving everything up and down in sync. The politician’s underlings no doubt bot the market long at today’s bottom since they knew the political happy talk would occur today. This is how the politicians make big profits and afford lavish beach houses; they are the kings of insider trading. The RUT small caps prints a new all-time high at 1090.30. After the bell, the Whitehouse says the meeting will occur at 11 AM tomorrow. House republican leaders will meet internally at 9 AM to discuss their strategy moving forward. The House will have to approve the Senate bill to resolve the dilemma. Riots in Moscow are the worst seen in years. Snowden, the whistleblower that exposed the U.S. government for spying on all Americans, says the NSA is using everyone’s cell phone and email contact lists to cross track and analyze everyone’s activity. The extent of the government spying on ordinary citizens is far deeper than originally thought. All your key strokes and cell phone messages are permanently archived by the government a la 1984 (George Orwell).
On Tuesday, 10/15/13, Asian markets are higher on the potential resolution to the U.S. political drama. A large 7.2 earthquake hits the Philippines. ECB’s Asmussen says the Euro group is discussing how to handle a Greek funding gap. So much for all the rosy talk about Greece lately; much of Europe including Portugal, Spain, Ireland and Italy remain very economically sick. German ZEW Sentiment is weaker than expected and the euro drops to 1.3530. AAPL hires Burberry’s rock-star CEO Angela Ahrends to lead marketing. Critics say Apple needs to focus on creating technology improvements rather than marketing pizzazz. C and STT prepare for a U.S. default by contemplating placing limits on the use of short-term Treasury bills as collateral. David Tepper, Appaloosa Management, remains bullish saying the SPX will continue higher. Empire State Mfg Survey is weaker than expected. The broad indexes begin trading and move sideways with wild swings up and down as political sound bites cross the wires. The meeting at the Whitehouse at 11 AM is cancelled and the Senate talks are placed on hold. The House will resume discussions and try to find a solution. Markets drop from 11:30 AM into the closing bell. The SPX finishes down 12 points, -0.7%, to 1698, losing the 1700 level. The Dow drops 133 points, -0.9%, to 15168. The Nasdaq loses -0.6%. The RUT drops -1.0%. Small caps lead lower after printing a new all-time high yesterday. After the bell, both INTC and YHOO beat on earnings and bounce higher AH’s. A short time later, however, both stocks are flat to negative. Fitch rating agency places U.S. debt on credit watch negative but maintains the AAA rating. In the evening, the House negotiations collapse which drops the futures markets but the Senate restarts their negotiations which provides lift to the S&P’s at +10. Twitter chooses to list on the NYSE no doubt to avoid a potential Nasdaq FaceBook IPO type debacle.
On Wednesday, 10/16/13, Typhoon Wipha hits Japan. Danone (yogurt and baby formula) drops -3.5% on weaker sales and forward guidance. A product safety problem with baby formula, that turned out to be unwarranted, hurts Danone as well as increased China regulatory pressure. European markets are weak. The world’s largest luxury company, LVMH, drops -5.5% on weak sales. U.K. jobless claims drop dramatically showing signs of a continued recovery. European car registrations are up which is encouraging but auto makers are sold off. At 5 AM EST, S&P +7, Dow +59 and Nasdaq +6. Copper is weak. Traders continue to expect the politicians to kick the can down the road and remain complacent and relatively unconcerned over the ongoing drama. Traders are encouraged that the U.S. political football is back in the Senate. JPM will pay 100 million to settle the CFTC lawsuit over the London Whale trading debacle. CPI data is cancelled due to the government shutdown. Warren Buffett says stocks are not in bubble territory. At 8 AM, optimism grows that the Senate will provide a plan in the hours ahead; S&P +11, Dow +98, Nasdaq +15. BAC beats on EPS but misses on the top line just like JPM and WFC last week. The broad indexes jump higher at the bell. News outlets report that Leader Boehner will place the Senate bill on the House floor for a vote so the political resolution appears imminent. Equities explode higher taking out all of yesterday’s losses with plenty more upside. The Dow is up near 200 points and the SPX is up 20 handles. The bulls are running. Housing Index data shows home builder confidence dropping but home builders move higher today with the broad market. Every single S&P financial stock is at least 1% higher. Utilities and commodities move higher. Copper recovers to the flat line. Senate Leaders Reid and McConnell announce a deal to reopen the government until 1/15/13 and lift the debt ceiling until 2/7/13. All that drama and the theatrics will continue with new deadlines less than 3 months away. Oh vey. It must be getting harder and harder to kick the can very far as it becomes heavier with debt. Both sides are quick to pat each other on the back and say they spent weeks moving towards this goal. Liars. Both sides were babies that would not talk at all, as well as the president refusing to talk, until a few days ago. Politicians love to rewrite history. The SPX reaches 1722 then moves sideways into the Beige Book which says employers remain cautious. Markets move flat across SPX 1718. SWK lowers guidance and is hit -15%. Other tool and home supply companies are down in sympathy and hinting at weakness ahead for the housing sector. BA is up +2% at all-time highs despite another 787 incident where an airplane door falls off as an Indian airliner lands. The SOX semiconductor index is above 500. The broad indexes run higher into the closing bell finishing at or near the highs. The SPX is up 24 points, +1.4%, at 1722. The Dow is up 206 points, +1.4%, at 15374. The Nasdaq hits a 13-year high up +1.2% to 3839. The RUT is up 13 points, +1.2%, to 1092, another all-time high. After the bell, AXP beats on earnings but moves flat. IBM, beats on EPS but misses on top line revenue. China underperforms. Big Blue coughs up -6% AH’s. EBAY earnings miss and guidance is lower so it is bludgeoned -5%. Ebay says holiday spending may be challenged and the government shutdown has dampened consumer sentiment. These two should dampen the tech sector tomorrow. The Senate votes to approve the bill 81-18 to end the shutdown and raise the debt ceiling and sends the bill to the House. The House approves the bill 285-144 and it goes to President Obama who signs the bill shortly after midnight. Thus, crisis averted—temporarily. The president provides himself and Congress with great advice saying that the “U.S. can’t govern crisis to crisis,” however, these clowns only kicked the can down the road a few weeks. Nothing has changed and the country is simply deeper in debt. This same shutdown and debt ceiling drama will resume as 2014 begins, only a couple months from now so the markets do not receive any real clarity moving forward. A measly 36,000 people have enrolled in the Obamacare exchanges. This represents only about 0.5% of the visitors in the same time frame. Only one person in every 200 are signing up. At this rate, there will be a paltry 2 million signed up as the new healthcare law goes into effect in January far short of the Whitehouse’s goal and need for 7 million people and more. Mark Cuban is found not guilty of insider trading.
On Thursday, 10/17/13, Asian markets gain since the U.S. debt crisis is averted for a few weeks. The futures are weak with the S&P’s -4, Dow -55 and Nasdaq -4. A relief rally may not occur (other than yesterday’s big bounce) since nearly all traders expected can-kicking by the weak-kneed politicians. Also, the fight resumes in a few weeks right where it left off so the political agreement actually solves nothing and the problems are prolonged. Federal employees return to work today and will receive back pay so they were given a free paid vacation and the country receives zero productivity for the money. On top of all the nauseating drama, pork-barrel spending projects are attached to the bill. Funds are provided for a dam project in McConnell’s State. The politicians cannot help themselves; these folks would steal the jewelry off your mother’s deceased body at the funeral home. The government shutdown is expected to cost the U.S. about 25 billion dollars and will shave about 0.5% to 0.6% off the GDP. The U.S. dollar $USD drops under 80, the euro pops above 1.36, and gold jumps higher back above 1300. The 10-year yield drops to 2.62%. Dutch telecom KPN plunges about -10% as talks over the AMOV (Carlos Slim) takeover break down. Traders now focus on the pending economic data deluge coming since the shutdown is lifted as well as earnings which are off to a weak start with only 57% of companies beating earnings thus far (typically this is at least 70% and higher). Copper is weak. UNH misses on earnings and is sold off -6%. GS earnings beat but it is sold off -3%. IBM, UNH and GS weakness will hurt the Dow today. Before the opening bell, the futures drop to S&P -7, Dow -107 and Nasdaq -6. VZ beats on earnings. Markets drop as trading begins but volatility plummets with the VIX collapsing to 13-ish which catapults equities higher. Philly Fed is weaker than expected. Equities continue higher into the closing bell with new all-time highs printing for the SPX at 1733 and RUT at 1102, now over the psychological 1100 level. The Nasdaq gains +0.6% to 3863. The Dow finishes negative. The 10-year yield drops to 2.58%. Fed’s Fisher, a strong hawk, says the economy is weak and QE will likely continue. When a hawk turns dove, like Kocherlakota a couple years ago, equities turn very bullish. The Fed’s easy money crack cocaine should continue indefinitely and pump the stock market higher. In the end, we are all Keynesians. After the bell, GOOG earnings are better than expected and jumps +7% AH’s. Analysts, pundits, the cab driver, Thomas Lee of JPM, Jeremy Siegel, David Tepper, NYSE floor traders, the shoe shine boy and the majority of investors all say to buy the market with both hands since the SPX 1770’s, 1780’s and even 1800’s are on the way. VIX is at 13 and the CPC and CPCE put/call ratios remain low verifying ongoing market complacency. With QE expected to continue well into 2014, the boats are fully loaded to the bull side. Snowden, the NSA whistleblower, says China and Russia have not received any sensitive U.S. information from his files. The Obamacare web sites continue to be plagued with problems and the ‘glitches’ now appear to be profound organizational and programming problems. The traffic to the sites has dropped off dramatically. The young healthy folks the program needs to support the funding are not in a rush to sign up. Many may simply pay the penalty. Instead, the folks in poor health, that need better health care, are trying to fight through the computer problems and paperwork to sign up. The government will likely have to bail the program out as time moves along and Joe Taxpayer will be stuck with the bill.
On Friday, 10/18/13, China economic data is much better than expected with a strong 7.8% growth rate. Recent stimulus packages (targeted QE-type easy money) are creating the activity. Copper moves higher. GOOG is up +10% pre-market setting a positive mood. MS earnings beat. Markets leap higher at the opening bell with the SPX now above 1740. Leading Indicators data is cancelled due to the shutdown. GOOG hits the 1000 price level (PCLN punched through 1K one month ago). The broad indexes move flat in the afternoon and start to leak lower but the bulls crush volatility in the last fifteen minutes of trading to finish the week with an upward market thrust. The bulls are running. Fed’s Evans says that the FOMC meeting in 11 days does not have enough data to consider tapering QE so the bulls run higher off this happy news that the Fed booze will flow forever. The SPX ends up 11 points, +0.7%, to a new all-time closing high at 1744.50 and new all-time high at 1745.31. The Dow is up only 28 points, +0.2%, to 15400. The Nasdaq explodes higher due to GOOG (up +13%), up 51 points, +1.3%, to a 13-year closing high at 3914.28 and new 13-year high at 3914.93. Traders are abuzz as to when the Nasdaq 4K level will be achieved only 86 points away. The RUT is up 13 points, +1.1%, to a new all-time closing high at 1114.77 and new all-time high at 1115.04. The 10-year yield drops to 2.59%. Interestingly, money is not moving from stocks to bonds but rather both stocks and bonds are moving higher. In a pure risk-on environment, and after the political clowns came to an agreement this week, the expectation would be for the 10-year yield to creep higher (prices down yields up). Instead, folks continue to seek the perceived safety of notes and bonds (prices remain high yields drop). Gold is 1317 well off the lows a couple days earlier. Utilities are breaking up and out of a long-term sideways symmetrical triangle which will help the market bulls moving forward, as long as it is not a false breakout. Health insurance companies are complaining that the information they are receiving from the Obamacare websites are riddled with mistakes. The U.S. debt moves up over $17 trillion but the politicians kick the can down the road and do nothing. This encourages the Fed to continue the reckless QE program. The Washington, D.C. clown circus is whistling past the graveyard.
On Saturday, 10/19/13, a ruling by a Milan court prevents Berlusconi from holding public office for 2 years but in Italy, decisions and appeals continue indefinitely. A Senate vote on Berlusconi’s fate takes place in November and may dramatically affect Italy’s politics and government stability. More and more detractors slap the Obamacare websites holding it up as a shining example of government incompetence. The fine print on the Affordable Healthcare websites says the government can use your personal information however they see fit. The Whitehouse is scrambling to find a solution to the debacle deciding to either pull the Obamacare websites off line to fix the problems, or, continue to try and fix the car while it is moving.
On Monday, 10/21/13, traders will turn attention to economic data and earnings. Fed’s Evans speaks. Existing Home Sales. MCD. TXN.
On Tuesday, 10/22/13, Monthly Jobs Report. AAPL unveils the new iPad. DD. UTX.
On Wednesday, 10/23/13, Import and Export Prices. BA. CAT. LLY. T.
On Thursday, 10/24/13, Flash PMI’s. Jobless Claims. New Home Sales. AMZN. DOW. F. MO. MMM. MSFT.
On Friday, 10/25/13, Durable Goods Orders. Consumer Sentiment. PG. UPS.
On Monday, 10/28/13, Industrial Production.
On Tuesday, 10/29/13, FOMC Meeting begins. PPI. Consumer Confidence. 5-Year Note Auction.
On Wednesday, 10/30/13, ADP Employment Report. CPI. GDP. 7-Year Note Auction. FOMC Meeting Announcement.
On Thursday, 10/31/13, EOM. Jobless Claims. Personal income and Outlays. Chicago PMI. Farm Prices.
On Friday, 11/1/13, PMI’s. ISM Mfg Index. Construction Spending.
On Friday, 11/15/13, Twitter IPO begins trading on the NYSE.
In Q4, European bank stress tests (there are likely 10% of the banks undercapitalized, perhaps around 130 banks, with no clear way on how to recapitalize these troubled institutions) 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 Friday, 12/13/13, Congress provides a detailed road map to handle the U.S. budget crisis moving forward.
----------------------------- 2014 ----------------------
On Wednesday, 1/15/14, a Continuing Resolution (CR) is needed to fund and keep the U.S. government open.
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, the Debt Ceiling Limit is hit where the U.S. may default on obligations. Treasury Secretary Lew will use extraordinary measures to extend this time forward so late February or early March is a likelier deadline. 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.
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