(Since this document is growing lengthy; for this weeks recap, and next weeks set-up, scroll down to the bottom to the larger print)
Stock Market Crash 2011 Timeline and Chronology:
Keystone chronicles the broad markets topping and rolling over during 2011, leading into the July-August-September 2011 crash. The charts and technical’s accurately forecasted the move all year long.
Keystone’s proprietary algorithm, Keybot the Quant, that trades the indexes long-short, using the SPX as a benchmark index, went short on 7/11/11 at SPX 1324 and covered on 8/23/11 at SPX 1146, a 178 handle gain in six weeks time, or 13.4%. The actual trade in SDS gained 25.6%. On 8/23/11, Keybot flips to the long side simultaneously at SPX 1146.
On 9/1/11, Keybot exits the long position at SPX 1207, a 61 handle gain in 8 trading days, or 5.3%. The actual trade in SSO gained 12.1%. On 9/1/11, Keybot flips to the short side simultaneously at SPX 1207.
On 9/8/11, as the indexes compress into a tighter band, Keybot flips to the long side at SPX 1200, a 7 handle gain, but a whipsaw occurs during the session as Chairman Bernanke tanks the markets and Keybot flips back to the short side at SPX 1186 taking a 14 handle loss.
On 9/14/11, on the happy Sarkozy-Merkel-Papandreou conference call euphoria, Keybot exits the short side at SPX 1180 for a 6 handle gain. Keybot flips to the long side simultaneously at SPX 1180.
On 9/22/11, at the open, Keybot exits the long side at SPX 1150 for a 30 handle loss, or 2.5%. Keybot flips to the short side simultaneously at SPX 1150.
Timeline and Chronology of Market Events Leading to the July August September 2011 Stock Market Crash:
In August 2010, the broad markets were going over the falls when Chairman Bernanke stepped in announcing quantitative easing, QE2. That immediately stopped the market collapse and sent the broad markets on an upward trajectory once again. The easy money flowed into emerging markets, copper, commodities and oil, creating new asset bubbles.
In January and February 2011, Tunisia and Egypt demonstrations result in outing their leaders. The Arab Spring, or Arab Awakening, is born. This Middle East turmoil causes oil, gold and silver to run higher. Food inflation accelerates since the demonstrations cause food shortages and disruption to food supplies. At the same time, for many months, Mother Nature has been reeking havoc around the globe causing further inflation in food and other commodities, like coal due to Aussie floods in late 2010.
In February 2011, the charts show that financials, technology, semiconductors and copper have topped and are rolling over. This is ominous considering the importance of these sectors. The weekly charts display negative divergence forecasting multi-week and multi-month weakness ahead for these sectors, and hence, the broad markets.
On 3/11/11, Japan is hit with an earthquake and tsunami. The disaster impacts the technology and auto supply parts areas which ripples thru affecting global markets.
On 4/18/11, S&P ratings agency, one of three major agencies that include S&P, Moody’s and Fitch, lowers the U.S.’s credit rating to ‘negative’ from ‘stable’.
On 4/29/11, the SPX closes at 1363.61, potentially the closing high for the year.
On 5/2/11, the SPX prints a HOD at 1370.58, potentially the highest intraday print for the year.
From late April to early May 2011, silver went parabolic towards $50. CME stepped in and slapped down silver by raising margin requirements several times. Silver dropped 35% from $50 to $33.
On 5/20/11, Keystone’s SPXA150R Indicator dropped under 80% indicating that the long bull rally had lost steam and the broad markets are turning bearish.
On 6/17/11, Keystone’s NYA 40 Week MA Cross Secular Indicator shows price falling under the 40 week MA signaling that the broad markets are falling into a secular bear market pattern. This fight between price and the 40 week MA continued into July until the change to a secular bear was locked in more firmly on 7/28/11. The broad markets have fallen into a secular bear market.
On 7/7/11, a Dow Theory Non-Confirmation signal is flashed with the Dow Transports placing a higher high than the May high, but the Dow Industrials languish over 200 points below its May high with no sign of strength. The non-confirmation signal places traders on high alert since the broad markets appear to be slipping into trouble.
On 7/11/11, Keystone’s proprietary algorithm, Keybot the Quant, a long-short algo, went short at SPX 1324 at 10:34 AM EST.
On 7/21/11, the SPX prints a HOD at 1347.00. This is the start of the waterfall crash.
On 7/22/11, the SPX closes at 1345.02. This is the start of the waterfall crash.
On 7/26/11, Keystone’s SPX:VIX Indicator fell under 68 signaling a large move down in equities is imminent. For 7/26/11 and 7/27/11, the SPX fell 2.5% and the Dow Industrials dropped 2.3%.
On 7/29/11, Friday, the SPX closes the day below 1300. Congress and President Obama continue to bicker like school children over raising the debt ceiling. The 8/2/11 deadline is fast approaching. The weekend, 7/30/11 and 7/31/11 is tense, with plenty of childish, finger-pointing political sound bites crossing the news wires continuously. Apple now has more cash at $76 billion than the U.S. government at $74 billion.
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On 8/2/11, Tuesday, President Obama signs the bill to raise the nation’s multi-trillion debt ceiling. The markets sell off large. SPX goes negative for the year, losing the 1258 level.
On 8/2/11, Keystone’s SPX 150 Day MA Slope Secular Indicator shows that the slope of the 150 day MA has leveled off and is now turning negative. A stutter step occurs 8/3 but 8/4 shows again that the slope has now reversed and the secular bull run from last December 2010 for the indexes has ended. The secular bear market has returned.
On 8/2/11, Keystone’s SPX 12 Month MA Cross Secular Indicator shows price falling under the 12 month MA signaling that the broad markets are falling into a secular bear market pattern. This was a major dagger in the broad markets and ends the one year long secular bull market. A secular bear market is born.
On 8/2/11, the SPX closes down 33 points, or 2.6%. The Dow Industrials drop below 12000, losing 265 points, or 2.2%.
On 8/3/11, Wednesday, copper collapsed around lunchtime.
On 8/3/11, Switzerland’s central bank takes steps to lower the franc’s exchange rate, saying the currency is ‘massively overvalued’ and threatening the Swiss economy’.
On 8/4/11, utilities collapsed in the morning which opened the flood gates for a market collapse. Once the utes, UTIL, lost their 50 week MA, a trap door was projected for the broad markets, which occurred during the afternoon.
On 8/4/11, the broad market selling moves towards exhaustion. The SPX loses 60 points, or 4.8%, and the Dow Industrials drop 513 points, or 4.3%.
On 8/4/11, Bank of New York Mellon Corporation said they will charge a fee to customers holding cash deposits over $50 million, effectively charging depositors for parking money at the bank.
On 8/4/11, investors moved strongly into the safety of very short-dated T-bills and the bidding was so overwhelming that the real rate was actually a negative yield. Investors are willing to pay the government to hold their money.
On 8/4/11, Dow Theory confirms a Sell Signal for the broad markets. The Dow Industrials and Transports both have closed under their June lows. Sell first and ask questions later.
On 8/5/11, Friday, markets attempt a recovery rally but it runs out of steam at lunchtime as a rumor circulates the trading floor that S&P has notified the U.S. Treasury that it was planning to downgrade the U.S. credit rating. A draft of the analysis was given to the White House. The White House identified a mathematical error in the analysis but S&P said the error has no impact on their decision and after the markets closed for the week, S&P downgraded the U.S. This sent the government, traders and the media into a tizzy all weekend long worrying about the effects on the markets for Monday’s open. The SPX loses the 1200 level today.
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On 8/7/11, Sunday evening, Asian markets open lower and U.S. futures plummet. The ECB announces that it would ‘actively implement’ its bond-buying program. Italy and Spanish bonds rally early Monday morning in anticipation of the ECB entering the market.
On 8/8/11, Monday, markets collapse at the open as the negativity from the S&P downgrade all weekend long causes traders to sell first and ask questions later. The SPX closes at 1119.46, dropping 80 points, or 6.66%, which many media analysts immediately highlight as the satanic 666. The Dow Industrials plummet 635 points, or 5.6%. Huge down day for the indexes.
On 8/9/11, The Federal Reserve makes a promise to hold short-term interest rates near zero through at least the middle of 2013. This signals that Chairman Bernanke and the Fed has written off the chances of an expansion strong enough to drive up wages and prices. The economic recovery is dying.
On 8/9/11, a snap back rally recovers much of Monday’s loss. The SPX places a LOD of 1101.54 but then catapults higher closing at 1172.53, regaining 53 points, or 4.7%. The move from 7/21/11 at SPX 1347 to 1101 is a drop of 246 spoo handles, or 18.3%, in only 13 trading days. The SPX LOD 1101 is now important support moving forward.
On 8/10/11, Wednesday, the market bears come to play again and drive the markets lower to close at the Monday closing lows again. The SPX closes at 1120.76, down 52 points, or 4.4%. The Dow Industrials lose the 11000 level, dropping 520 points, or 4.6%.
On 8/10/11, gold price has gone parabolic. CME steps in to raise margin requirements effective end of day 8/11/11.
On 8/11/11, Thursday, the market bulls drive the indexes up again recovering all the lost ground from Wednesday’s session. The SPX closes at 1172.64, up 52 points, or 4.4%. The last three days see a move from 1170-ish down to 1120-ish, back up to 1170-ish, then back down to 1120-ish. Fourth day in a row of unprecedented major market point moves for the broad indexes.
On 8/11/11, a short-selling ban on financial stocks is instituted for France, Belgium, Italy and Spain. A temporary short-sale ban remains for Greece and Turkey.
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On 8/15/11, Monday, Keystone’s SPX:VIX Ratio Indicator moves above 35 indicating that a big up day will occur in the markets. The SPX gains 26 points, or 2.2% and the Dow Industrials gain 214 points, or 1.9%.
On 8/15/11, the SPX, closing at 1204.49, has now regained the entire point loss that resulted from the S&P downgrade on 8/5/11 at SPX 1199.38.
On 8/16/11, Tuesday, broad index futures turn strongly red overnight to indicate a much lower open. All eyes are focused on the meeting between Sarkozy (France) and Merkel (Germany). The leaders downplay the hype surrounding the meeting to lower expectations. Talk heats up concerning the potential implementation of Euro bonds but Germany says nein. Merkel and Sarkozy, however, emphasize that Euro bonds are not the answer ‘today’, therefore hinting that perhaps in the future Euro bonds would be a possibility.
On 8/16/11, shortly after the markets opened, Fitch, one of the three rating agencies (S&P, Moody’s, Fitch), reaffirms a ‘stable’ outlook for U.S. debt. This decision flies in the face of the S&P downgrade and encourages bullish traders. The bulls and bears fight it out all day but only move within Monday’s SPX trading range of 1178-1205, closing at 1192.76.
On 8/17/11, Wednesday, Merkel and Sarkozy, announce a plan to raise taxes on financial transactions. Banks sell off on the news. Media outlets now referring to the two partners as ‘Merkozy’. The indexes pop at the open and have a chance to confirm a recovery rally if the SPX maintains the 1200 level, but, by late morning, 1200 failed and the indexes slipped away to close out the day unchanged. Keystone’s proprietary algorithm, Keybot the Quant, came within seconds of flipping to the long side, but remains short from 7/11/11 as the session ended.
On 8/18/11, Thursday, European banks are falling large on news that the ECB dollar facility was tapped for the first time since 2/23/11. A mystery bank borrowed $500 million worth of one-week dollars at a fixed interest rate of 1.1%. This rate is well above the rate that would be expected so traders sniffed out distress in the Euro banking system, selling first and asking questions later. Futures fell sharply and only worsened as Claims and CPI data thru gasoline on the fire. The Philly Fed data at 10 AM shows vast manufacturing weakness and locked in the day’s negativity. At the opening bell, the SPX fell 30 points, 2.6%, and the Dow fell 300 points, 2.5%, in only three seconds.
On 8/18/11, at 10 AM EST, the 10-Year Treasury Note yield drops to a record low under 2%, printing a spike low of 1.97% before recovering back above 2%. Traders are rushing into the relative safety of U.S. bonds considering that the global growth story is dead. 30-Year Bond yields touched 3.35%, the lowest since January 2009. The all-time low was 2.51% set in December 2008 during that equities crash. Gold moved above 1820 as traders seek safety.
On 8/18/11, Keystone’s SPX:VIX Ratio Indicator fell under 35 after the opening bell indicating that a large down day is in store for the indexes. The session ended with the SPX down 53 points, or 4.5%. The Dow Industrials closed under the 11000 level, down 420 points, or 3.7%.
On 8/19/11, Friday, the day begins with gold catapulting higher in the overnight session to reach 1880, the parabolic move now straight vertical. No sign yet of the CME raising gold margin requirements. The futures are deeply red and banks continue to sell off. BAC announces 3500 job cuts, in addition to the 2500 that already received pink slips this year. As the trading session started, BAC announces that as many as 10000 jobs will be eliminated this year. BAC has lost over 40% of its value in the last five weeks. Rumors are rampant with talk of an emergency Fed meeting occurring as well as the SNB, Swiss National Bank, implementing new tax on foreign held deposits over this coming weekend. JPM and C both lower their GDP forecasts.
On 8/19/11, the indexes drop at the opening bell but quickly stabilize as traders seek a temporary bottom for equities markets. The selling begins again at 11 AM and stocks drop into the closing bell. Traders pare back positions heading into the weekend. The SPX closes down 17 points, or 1.5%. The Dow Industrials close down 173 points, or 1.6%.
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On 8/21/11, Sunday, German Chancellor Merkel reiterates once again that Euro bonds are not a possible solution, but, also says that perhaps in the future they must adapt. Thus, wiggle room is opened to Euro bonds at some future date. All in all, this weekend 8/20/11 and 8/21/11 is calm and quiet on the financial front considering the market turmoil over the last three weeks. On the war front, however, Colonel Gadaffi’s regime is on the brink of collapse as the rebels gain control of Tripoli.
On 8/22/11, Monday, Tripoli is taken by the rebels overnight and considering that Gaddaffi’s days are ending, the futures steadily gain thru the morning hours on new found optimism. The markets jumped higher at the open, the Dow crossing above 11000, but then quickly collapsing lower as the day plays out. At the close, GS announces that Lloyd Blankfein previously hired a personal attorney; this news whacks GS in the final minutes of trading and continues to cast a dark cloud over the financials. Markets believe that Chairman Bernanke will announce a QE3-friendly course of action on Friday, 8/26/11, as the trading week begins. GLD, the gold ETF, now has the largest assets of any ETF, surpassing SPY.
On 8/22/11, Keystone’s UPS 20 and 50 Week MA Cross Indicator shows the 20 MA falling under the 50 MA, the first time in over two years. This indicates that the broad markets have now fallen into a secular bear pattern for the long term; this is the last of Keystone’s four secular market indicators to fall into place signaling a secular bear market moving forward. On 8/23/11, however, the UPS 20 MA regained the 50 MA but this shot across the bow is important; weakening shipping sector means no recovery.
On 8/23/11, Tuesday, Gold peaks at 1918 in the overnight session. Gold daily chart shows an outside reversal day where gold places a higher high than Monday, and then closed below Monday’s low—very bearish; the gold selloff begins. The indexes finish up huge on QE3 anticipation, the SPX jumping 39 points, or 3.5%. The Dow Industrials finish up 322 points, or 3.0%.
On 8/23/11, Keystone’s proprietary algo, Keybot the Quant, exits its short position at SPX 1146 at 11:51 AM EST. The algo initiated the short side on 7/11/11 at SPX 1324 accounting for a 178 handle gain, or 13.4%. The actual play was SDS resulting in a 25.6% gain. Keybot enters a long position at SPX 1146 simultaneously.
On 8/24/11, Wednesday, Moody’s rating service downgrades Japan’s debt, slapping down buoyant Asian markets. The broad markets continue with the recovery rally. Gold sells off $100 ending the day at 1754, losing over 150 dollars, or 8.6%, in less than two days. CME raises gold margin requirements for the second time in two weeks after the markets close. Steve Jobs resigns as CEO of Apple and S&P futures immediately drop 5 points.
On 8/24/11, insurance on the debt of several major European banks has now hit higher levels than those recorded during the financial debacle in 2008. Credit default swaps (CDS) on the bonds for banks such as Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, to name a few, flashed the dire signals today. This development highlights a coming liquidity crisis a la 2008, more than likely occurring in the September-November time frame.
On 8/25/11, Thursday, weakness in tech occurs due to AAPL’s weighting in the indexes. Warren Buffett provides a $5 billion capital injection into BAC which bounces the indexes large at the open. But, minutes into trading, the indexes collapse on rumors of a sovereign downgrade of Germany’s debt. The DAX tumbles almost 2%. The rating agencies release statements that Germany’s ratings are not under a downgrade but traders sell first and ask questions later; the damage was done. Finland throws gasoline on the fire as they request collateral from Greece gumming up the prior agreements among the Euro countries. The SPX closes down 19 points, or 1.6% and the Dow Industrials close down 171 points, or 1.5%.
On 8/26/11, Friday, the GDP prints 1.0%. Chairman Bernanke stops short of signaling further stimulus. The Swiss, SNB, hints that further action is coming to stem the strength in the franc such as local banks starting to charge customers for franc deposits. The markets take a wild ride opening the day down large, then recovering to post big gains, then fading into the close as traders worry that the stock exchange may be closed on Monday due to Hurricane Irene hitting New York. The SPX moved thru a 45 point range today while the Dow Industrials moved thru a 397 point range. The SPX closed up 18 points today, or 1.5%. The Dow Industrials closed up 135 points today, or 1.2%. The Nasdaq and Russell 2000 were up over 2.5% today. The indexes produced a recovery rally this week with the SPX gaining 4.7% for the week and the Dow gaining 4.3%.
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On 8/28/11, Sunday morning, Hurricane Irene is downgraded to a tropical storm so there will be no closure to the stock exchange Monday.
On 8/29/11, Monday, Keystone’s UPS 20 and 50 Week MA Cross Indicator shows the 20 MA now convincingly under the 50 MA. The broad markets are now firmly in a secular bear market. This is the last of Keystone’s four secular market indicators (SPX 150 Day Slope; NYA 40 Week MA Cross; UPS 20 and 50 Week MA Cross; and SPX 12 Month MA Cross) to fall into a secular bear market indicating that equity weakness will continue for the foreseeable future, weeks and months ahead. Despite this bearish projection, for the short term move, Keystone’s SPX:VIX Indicator moves above 35 projecting a large move up for the indexes today. The SPX finished the day up 33 points, or 2.8%. The Dow Industrials finish up 255 points, or 2.2%. These large index moves either way due to the high volatility.
On 8/30/11, Tuesday, before the open, Charlie Evans, a Fed voting member, says a ‘strong accommodation’ is needed, in other words QE3. Gold jumps higher, dollar lower and equities catch a bid to finish the day up.
On 8/31/11, Wednesday, the blood bath for the month of August ends. The SPX finished the month down 5.7%, the Dow Industrials off 4.4% and the Nasdaq down 6.5%. Keystone’s SPX 12 Month MA Cross Indicator now seals the deal with the month-end print to confirm the secular bear market moving forward.
On 9/1/11, Thursday, in a surprise move Brazil lowers rates. The President moves the jobs speech to Thursday, 9/8/11, after Speaker Boehner refused the request for Wednesday night, a pre-scheduled republican debate night. The pettiness and dysfunction of the President and Congress continues to increase the negativity for the markets. Italy begins to waffle on its proposed austerity program increasing the Euro instability. The Fed announces an enforcement action against GS at 1:30 PM EST and the buoyancy in the equities markets all week long reverses with the financial sector plummeting taking the broad markets down. As the day plays out, traders become increasingly negative concerning the Friday jobs report.
On 9/1/11, Keystone’s proprietary algo, Keybot the Quant, exits its long position at SPX 1207 at 2:02 PM EST. The algo initiated the long side on 8/23/11 at SPX 1146 accounting for a 61 handle gain, or 5.3%. The actual play was SSO resulting in a 12.1% gain. Keybot enters a short position at SPX 1207 simultaneously.
On 9/1/11, during the evening hours, the news wires report that the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, filed law suits against the largest banks, including JPM, GS, BAC, C and DB, 17 in all, for misrepresenting the quality of mortgage securities they sold creating the housing bubble. The futures immediately move lower.
On 9/2/11, Friday, the Labor Department announces that employers added zero new jobs in August. The current number of U.S. jobs is below 2001 levels. Futures collapse from already low numbers, the SPX set to open the trading day down about 20 points and the Dow Industrials down about 200 points.
On 9/2/11, the trading session tumbles at the open as expected, hitting lows about one hour into trading, but then recovering as traders look forward to the Labor Day holiday weekend. The ten-year yield drops below 2%. The yield on the Greek 2-year note hits 50%. After lunch, however, stocks fell steadily only receiving relief in the final half hour. The SPX finishes the day down 30 points, or 2.5%. The Dow Industrials finished down 253 points, or 2.2%.
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On 9/5/11, Monday, U.S. markets are closed for the Labor Day holiday. The European major indexes tumble over 4% with the DAX losing 5%. The U.S. lawsuits against the corrupt banksters during the mortgage crisis accelerated the European losses. Credit default swaps hit a high for Italy. The 10-year yield prints a historic low at 1.92%. Banks are reluctant to lend. The Libor 3-month rate (Libor is the rate at which London-based banks say they can borrow) climbs to the highest level in one year.
On 9/6/11, Tuesday, the Swiss Central Bank imposes a ceiling on the franc. They feel the rise in the franc (due to traders seeking a safe haven) is a serious danger to their economy as well as creating a deflation risk. Detsche Bank’s Ackerman worries that ‘we are repeating a Lehman-type event form Fall 2008’. World Bank President Zoellick states that we are now entering a ‘dangerous’ time. Singapore’s Minister of Finance Shanmugaratnam says that the U.S. and European weakness will hurt Asia and a recession is likely. Italy lowers growth forecasts and the managing director of the IMF, Christine Lagarde, says the ‘outlook has darkened suddenly’. The holiday fun is already a distant memory.
On 9/6/11, the indexes fall and Keystone’s UTIL 50 week MA ‘trap door’ indicator is tested. If the utilities, UTIL, fall under the 50 week MA, the markets will go into free fall. Armageddon was avoided, shorts covered, and the markets recovered to the upside. The major global economic bellwethers, however, copper, rubber, chemicals, steel and cardboard boxes all foretell economic weakness ahead. During the evening hours, the CME raises Swiss franc futures requirements. Gold places a second intraday high top in the past 10 days at 1923.
On 9/7/11, Wednesday, the German High Court rules accepting the actions taken so far for the European debt crisis but warns that they must be consulted for any future deliberations. This is viewed as somewhat positive since they did not rock the shaky European boat.
On 9/7/11, Keystone’s SPX:VIX Ratio Indicator moves above 35 indicating a big up day on tap for the markets. The excitement flattens as the Beige Book is released at 2 PM EST. The SPX finishes the day up 33 points, or 2.9%. The Dow Industrials close up 276 points, or 2.5%.
On 9/8/11, Thursday, the markets are building upside momentum. The day begins with the ECB rate decision to leave rates on hold. Outgoing ECB president Trichet says ‘economic risks exist to the downside and the current environment is uncertain’. The door is left slightly ajar for lowering rates.
On 9/8/11, Keystone’s algo, Keybot the Quant, triggers to the long side at SPX 1200, gaining 7 handles from the short play on 9/1/11 at SPX 1207, only to experience a whipsaw as Chairman Bernanke begins speaking after lunch. Keybot flips back to the short side at 2:28 PM EST at SPX 1186 taking a 14 handle loss.
On 9/8/11, Chairman Bernanke begins speaking at 1:30 PM driving the equities markets straight off a cliff. Bernanke did not provide any details on the upcoming anticipated ‘Operation Twist’, or ‘Torque’, as others call it, where the Fed sells short-term treasuries and buys longer-term 10-year and 30-year bonds in an attempt to narrow the yield curve and lower long term rates. The idea is to get investors to return to the stock market increasing the wealth effect and jump starting the economy again. Bernanke used the wealth effect idea for QE2 and we see how that worked out. Folks are probably much more concerned about their own struggles each day, especially with the dust bowl continuing across Texas and the south with hurricanes now popping up like weeds, while at the same time the Northeast receives one week of rain and the flooding is widespread.
On 9/8/11, the super committee, charged with developing a deficit reduction plan of finding at least 1.2 trillion by 11/23/11, begins deliberations. The children start off on a sour note as Republican Jon Kyl states that he will quit the committee if defense spending cuts are discussed. The market mood sours.
On 9/8/11, into the close, Keystone’s SPX:VIX Ratio Indicator drops back under 35 indicating that the markets are headed substantially lower in the Friday session.
On 9/8/11, in the evening, President Obama addresses Congress, interrupting the pre-game shows for the kickoff of the NFL football season. The President attempts to fly above it all, like a trapeze artist, lecturing everyone that the current ‘circus’ must stop and the politico’s must all join together for the good of the country. The problem is that he has overseen this entire mess as ringmaster of the circus and is in fact part of the clown show. The partisan speech appears more focused on kicking off his reelection campaign than solving the nation’s problems. The American Jobs Act is much bigger than anticipated, $447 billion versus $300 billion. The President had the country wait one month for this masterful solution to the job crisis, as he vacationed in the sun, and says all the ideas are paid for, but he will not have that information for a few more days. Markets are disappointed and the futures drift lower.
On 9/9/11, Friday, the futures are substantially lower as the President’s speech fails to inspire anyone and the Europe news worsens. The indexes open lower as expected. Keystone’s SPX:VIX Ratio Indicator remains under 35 indicating a large down day is on tap. Stocks drop during the morning session and accelerate lower as news hits that ECB member Juergen Stark, a German anti-inflation hawk, will step down.
On 9/9/11, BAC announces that up to 40,000 jobs will be cut, a huge increase over the prior 3,500 forecast, and accounting for over 14% of their entire workforce. Sallie Krawcheck, respected by many, is fired from BAC. Firecracker Carol Bartz is fired from YHOO. Solar company Solyndra, that President Obama touted as the way to the future, providing $500 million in loan guarantees, went belly-up, wasting more money.
On 9/9/11, as the holiday-shortened week closes and the effects of Stark’s resignation are felt, the SPX is down 32 points today, or 2.7%. The Dow Industrials fell 304 points, or 2.7%, and lose the psychological level of 11,000. Overall, the markets register another down week.
On 9/10/11, Saturday, G-7 finance ministers and central bankers attempt to calm the markets. The meetings are focused on the Eurozone problems. Standard soothing words include ‘we stand ready to provide liquidity to banks as required’, and, ‘we will take all necessary actions to ensure the resilience of banking systems and financial markets’. Sure does sound like Fall 2008.
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On 9/11/11, Sunday, as the futures begin trading and the 9-11 ten year anniversary ceremonies draw to a close, Moody’s says that a downgrade of European banks is on the table. Futures trail off lower setting up a down opening for Monday’s trade. The 10-year yield hits another low record of 1.88%.
On 9/12/11, Monday, the futures are substantially lower setting up a 15 to 20 handle loss on the SPX and a 150 to 200 point drop in the Dow Industrials. Germany is busy preparing for a Greece default. Greece continues to deny the default rumors but traders consider it a done deal, it is simply when, not if, and the fears now turn to the contagion effects once Greece does default. The SPX is down about 10 handles as the day motors along and Keystone’s utility indicator, where a loss of UTIL 50 week MA will indicate that the broad markets will go into free fall, fails at 2:19 PM EST. In four minutes, however, UTIL regains the 50 week MA and catapults upwards taking the broad markets skyward. An FT news story hits simultaneously saying that China is talking with Italy to buy their bonds and support Europe debt; the markets run up into the close. To further support markets, SocGen states that they are well-capitalized, nothing to see here, move along. Like the denials in the U.S. in 2008, this only adds to trader skepticism. Gold slides from Sunday night thru the day today, losing over $40 as margin calls go out on equities and global traders liquidate gold holdings to cover the losses. At the close, the Dow Industrials are back above 11000. GS trades under $100/share, down about $80 from the SEC suit earlier in the year, and now returning to levels seen during the broad market bottom in spring 2009.
On 9/13/11, Tuesday, futures collapse in the overnight session around 2 AM EST. Perhaps China is not the rich uncle everyone thinks it is. French banks need recapitalized and BNP Paribas falls 6% in early trading on rumors that the bank is having funding issues. The ‘break the buck’ talk heats up, much like the U.S. in 2007 and 2008 that accelerated the panic, as money market funds are withdrawn, a key element to banking stability. France states that the banks are well capitalized and a rumor circulates that Merkel and Sarkozy spoke on the phone so the markets jump upwards, BNP Paribas recovers all losses and then some. Shortly after, the rumor is dispelled so the markets fall. Then Russia announces that they will help bail out Europe and the indexes soar upwards again. The markets are reacting completely to Europe news in real time now. The news wires report that a conference call will occur between Sarkozy (France), Merkel (Germany) and Papandreou (Greece) tomorrow at noon New York time so the markets become buoyant again.
On 9/14/11, Wednesday, Merkel says that Europe will avoid a ‘disorderly default’ by Greece. A poll is released stating that 72% of the country says the U.S. is on the wrong course and a recession is coming. The share of bearish publications tracked by Investors Intelligence (a newsletter sentiment survey) indicates the highest level of bearishness since March 2009 (this was a market bottom, the survey typically a contrarian indicator). China’s Wen Jiabao say’s the world should not rely on them and Yu Yongding, a former China central bank advisor, says that China should avoid lending to troubled nations. Moody’s downgrades French banks Societe Generale (SocGen) and Creidt Agricole. The futures are red on this news. Asia was up earlier but finishes the session down. Geithner says that Europe needs to step up their efforts, that there will be no Lehman-type event in Europe, and jumps on a plane to attend the Eurozone meeting in Poland this weekend to decide how to structure Greece debt. Markets become buoyant on Geithner’s comments. European Commission (EC) President Jose Maniel Barroso said that proposals for common Euro bonds is forthcoming. The markets become buoyant during the morning session but about an hour into trading the Austrian Parliament’s finance committee voted against a motion to fast-track the budget proposal to fund their contribution to the EFSF. Initially, there is confusion over what occurred, and the markets tumble thinking that Austria voted no on the EFSF but shortly thereafter the clarification was given that it was simply a vote as to whether to fast-track the process, or not, and the vote was simply deferred. The markets reverse once again and rocket skyward. Around noon time, a communiqué is released from the Paris-Berlin-Greece conference call with the leaders stating that Greece is a central part of Europe and will remain part of a unified Europe. The broad markets take off vertically to the upside on the happy news and a euphoric mood hits the markets.
On 9/14/11, as the markets become euphoric over the Sarkozy-Merkel-Papandreou conference call, Keystone’s algo, Keybot the Quant, exits the short side at SPX 1180, gaining 6 handles from SPX 1186 on 9/8/11, or 0.5%. Keybot flips to the long side simultaneously at SPX 1180.
On 9/14/11, Keystone’s SPX:VIX Ratio Indicator moves above 35 verifying that a large up day is in play today and the market bulls are in full control of markets. Before the close, however, the ratio drops back under 35 nullifying the signal and the markets trail off into the close retracing about one-third of the day’s gains. The utilities, semiconductors and retail sectors drive the bullish upside but caution is warranted, however, since copper, commodities, financials and the high volatility indicate that all remains not well with markets. The SPX finishes up 16 points, or 1.4%. The Dow Industrials finish up 141 points, or 1.3%.
On 9/15/11, Thursday, around 8 AM EST, gold price falls under 1800. Just before the opening bell, a coordinated effort is announced between the ECB and other central banks providing liquidity by offering dollar loans to Euro countries thru the end of the year. The equities futures bounce, euro bounces over 1.39 (equities and euro move in the same direction), the 10-year yield bounces to 2.11% and gold weakness continues with price testing under 1790, then 1780.
On 9/15/11, market bulls run the indexes higher and the SPX, up and over 1200, now retakes the level at which S&P downgraded the U.S. on 8/5/11. Keystone’s SPX:VIX Ratio Indicator jumps above 35 at the open indicating a huge up day on tap for the broad markets. The day ends with the SPX up 20 points, or 1.7%. The Dow Industrials close up 186 points, or 1.7%.
On 9/16/11, Friday, all eyes are focused on the Eurozone finance ministers meeting kicking off in Poland. Geithner arrives to a warm reception but the hospitality fades as he recommends that a more coordinated voice should speak for Europe as well as the need for the Eurozone to get their house in order quickly. Members mumble under their breath that those in glass houses should not be throwing stones. In a surprising announcement, the group says that the decision on Greece qualifying for the next round of bailout money would be pushed forward to October. Finland continues to want guarantees as they support Germany’s thinking. India raises interest rates for the 12th time in 18 months and signals more to come, going against its Asian peers that have lowered tightening expectations.
On 9/16/11, the trading week ends with the major indexes printing five up days in a row, led mainly by large cap tech, resulting in the best week since late June, before the crash. Semiconductors led the way with retail and the utilities adding further power but other sectors remain weak. The SPX was up 5.4% for the week, regaining 1200, the S&P downgrade level, and the Dow Industrials were up 4.7%, regaining both the 11000 and 11500 levels. Gold regains the 1800 level.
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On 9/18/11, Sunday evening, the Eurozone finance ministers end the meeting without any statement released or any resolution to the ongoing Greek tragedy. Markets lose confidence and last week’s euphoria disappears as futures plummet with the Dow down about 200 handles and the SPX down 20 handles as U.S. traders retire for the evening.
On 9/19/11, Monday, traders wake to see that the futures have not improved. Traders abandon positions and buoy gold price as they seek a safe haven. Markets are back in the same funk as a couple weeks ago worrying about a Greece default and the resulting contagion. After the opening bell, markets sell off large as expected, and gold reverses its move and falls thru the 1800 level. Traders await news concerning a Troika (a Russian word that means three-of-a-kind) Conference Call. The troika is comprised of the IMF (International Monetary Fund), the EU (European Union) and ECB (European Central Bank). President Obama speaks spouting ‘tax the rich’ rhetoric while the republicans cry ‘class warfare’; the children continue the bickering and the budget talks grow more hostile.
On 9/19/11, Keystone’s SPX:VIX Ratio Indicator drops under 35 at the open indicating a large down day on tap today, but, in the afternoon trade, the ratio moves back above 35 and starts to accelerate higher. The indexes recover much of the day’s losses.
On 9/19/11, around 2:30 PM, the Troika Conference Call finishes up and a release describes the call as “productive and substantive.” Traders fail to become excited over this news since it sounds like more of the same, so markets stumble sideways. Then a release citing an anonymous Greek official around 3 PM states that Greece is close to a bailout deal with troika. Markets recover quickly on this news and a short-covering rally sends the indexes upwards into the close. The SPX finishes the day down 12 points, or 1.0%. The Dow Industrials finish down 108 points, or 0.9%.
On 9/19/11, the yield on the 10-year Treasury note is now below the yield on the S&P 500. The index is yielding 2.21% versus the 10-year around 1.95%. Typically, when stocks yield more than bonds, the stock market is up about 20% a year later. With Chairman Bernanke manipulating yields with quantitative easing, however, throw out the playbook.
On 9/20/11, Tuesday, S&P downgrades Italy’s credit rating citing weak economic growth. A Moody’s downgrade is expected but S&P beat them to the punch. Concerns over liquidity for the French banks continue on news that Siemens had withdrawn funds form SocGen over the last month. Chinese state banks have stopped trading currency swaps with some European lenders indicating an unwillingness to support Europe, further exacerbating the Eurozone banking issues.
On 9/20/11, the markets open and head higher despite the negative news. In the afternoon, the IMF says the world economy has entered a “dangerous new phase,” downgrading its economic outlook for the U.S. and Europe thru the end of 2012. Markets sell off on the news and end flatish on the day.
On 9/21/11, Wednesday, Keystone’s SPX:VIX Ratio Indicator falls below 35 at 10:50 AM EST indicating that the indexes will sell off large today. Moody’s cuts the ratings on BAC, WFC and C; banks plummet from 4 to 8%. Experienced traders buzz about new trouble brewing for Italy.
On 9/21/11, Chairman Bernanke announces Operation Twist but more importantly, adds the word “significant” to its negative risk assessment of the economy. Stocks plummet into the close. The SPX closes down 35 points, or 2.9%. The Dow Industrials close down 284 points, or 2.5%. The House surprisingly votes down a bill that places the U.S. in fear of a government shutdown on 9/30/11—the last thing these markets need.
On 9/22/11, Thursday, the overnight futures are blood red as global markets sell off large. The CAC Index (France) prints the low of the year. The South Korea Kospi Index was near limit down off about 9%. Copper is now in a bear market, dropping over 20% from its top. Lack of growth is reflected by the HSBC China data and commodities slide further. Treasuries hit historic low yields; the 10-year at 1.76% and the 30-year bond at 2.83%. The dollar jumps higher. Gold drops under 1750 as hedge funds liquidate positions to cover other losses. The following asset relationship is in place; dollar higher=euro lower=copper lower=gold lower=equities lower=treasury prices higher (yields lower).
On 9/22/11, markets collapse at the open with a highly negative vibe in the air. Keystone’s algo, Keybot the Quant, closes the long play at SPX 1150 losing 30 handles from the trade, or 2.5%. The actual trade in SH loses 4.3%. The algo flips short at SPX 1150 simultaneously. Markets are extremely volatile.
On 9/22/11, Gold moves below 1730 briefly, the SPX falls over 30 handles and the Dow Industrials tumble over 300 points. Fear over China’s property bubble is growing by the day. Trade and currency tensions escalate around the globe; this is worrisome since it typically leads to depression and/or war. The Dow is down over 400 points at the noon hour. The Drudge Report site sensationalizes the sell off showing a photo of frantic screaming traders with the headline “Global Meltdown: Investors Dumping Everything.” Word hits the wires that Japan will help bailout Europe by buying EFSF bonds. The euro and equities move higher on the news but then roll over and weaken again. At 1 PM, the SPX is now down over 40 points. At 2 PM, the Dow Industrials are down over 450 points, over 4%, for today. The SPX loses the 1120 level, over 4% loss thus far today. Brazil’s Mantega says the BRIC countries all see a ‘worsening global economy’. The broad markets are collapsing and looking bleak. The FT reports that the EU is accelerating a move to recapitalize the Euro banks which stops the market slide, although the indexes remain down about 3.5% on the day. Traders realize the Euro news is the same ole malarkey, so the indexes start to drift lower again. Shortly after 3 PM, the markets tumble further, the Dow Industrials now down over 500 points and the SPX down over 50 points. Silver loses over 10%.
On 9/22/11, the SPX closes the day down 37 points, or 3.2%. The Dow Industrials close down 391 points, or 3.5%. The activity on the news wires continues all evening long. Stephen Roach of MS sees a ‘synchronized global recession’ coming. Nouriel Roubini, well-known economist, says Europe is now in a recession. The CNBC network runs a special nighttime program to address the market sell off. The G-20 Finance Ministers say they will “take all necessary actions” to preserve financial stability and the central banks stand ready to provide liquidity.
On 9/23/11, Friday, the first day of Autumn begins with Moody’s downgrading eight Greek banks. The Kospi index experiences panic selling and closes down 5.7%. A South Korean banker commits suicide after a police raid occurs searching for evidence of shady dealings. Jean-Pierre Jouyet, the France Securities Regulator, says 15 to 20 Euro banks need recapitalized. Gold drops below 1720. Futures deteriorate in the pre-market action. Gold now loses 1700 level, then 1690. The 10-year treasury yield now dips under 1.80% to 1.68%. Markets open without a major flush down, the indexes turn flat to positive in short order. Gold moves to 1660 and silver dumps another 10% with a 32 handle now. Copper now 30% off its highs far past the minus 20% threshold to confirm a bear market in copper. At 1:20 PM, gold is now down over 100 dollars on the session. Commodities, CRB, sells off to a 301 handle.
On 9/23/11, at the close, the big story is the weekly numbers. The SPX is down 7% this week. The Dow Industrials lost 6%. Silver lost 26%!! Copper down 17%! Gold down 10%. Oil down 10% now under $80. The booze flows like water tonight as disheveled traders run to their local watering holes to drown their sorrows with a drink or three.
On 9/26/11, .……………the saga continues…………..
Coming Attractions:
Greece and Italy are the problems. Decision on next Greece bailout move is delayed until October. Moody’s review of potential downgrade of Italy debt will be decided in October. Markets remain at the mercy of Euro news.
Global recovery stalling. China bubble popping. Copper and commodities dropping.
Economic data and speeches for the new week start off quickly with the Chicago Fed Index at 8:30 AM followed by Bullard (St. Louis Fed) speaking at 9:30 AM. The Fed is out in full force all week long with lip service. New Home Sales hit at 10 AM Monday and then the Dallas Fed Survey is 10:30 AM. Kocherlakota (Minneapolis Fed) talks at 3 PM. On Tuesday, Case-Shiller is at 9 AM, the news will not be good, then Consumer Confidence at 10 AM, this is a potential market pivot point. Richmond Fed Index and State Street Index hits at 10 AM also. 4-Week Bill Auction at 11:30 AM. 2-Year note Auction at 1 PM. On Wednesday, another Fed head, Rosengren (Boston Fed) talks at 2:40 AM. Then Durable Goods are 8:30 AM, Oil Inventories 10:30 AM and 5-Year Note Auction. On Thursday, GDP and Jobless Claims at 8:30 AM. Also, Rosengren and Plosser (Philly Fed) talk at 8:30 AM. Pending Home Sales hit 10 AM then the 7-Year Note Auction at 1 PM. Personal Income and Outlays are at 8:30 AM Friday, then Chicago PMI at 9:45 AM, Consumer Sentiment at 9:55 AM which should usher in a market pivot point. Bullard closes out the Fed talk for the week at 11 AM.
Congress is playing games again with the vote on funding the government, a further negative for the markets. The super committee of 12 House and Senate members continues deliberations to develop a deficit reduction plan of at least 1.2 trillion by 11/23/11.
The peak of hurricane season continues. Dust bowl in the south and rains and floods in the Northeast continue although last week was somewhat calm.
From now thru 9/30/11, Q3 window dressing. EOM and EOQ3 9/30/11. October and Q4 begins.
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