On 10/21/11, the weekend begins with the markets expecting a firm outline from the EU meeting come Monday morning, then a concrete plan by Wednesday, 10/26/11. Germany and France continue to work out their differences. The problem is that Europe needs a plan that handles the Greece default without creating contagion, and, if contagion occurs, have additional funds available to meet any outcome, while, on the other hand, if an extensive plan is put forth, France may lose its credit rating thereby bringing down the house of cards from a different angle. This is the quandary that France and Germany is dealing with leading to indecision and erratic global markets.
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On 10/23/11, Sunday, snippets of news out of the EU Summit meeting do not affect futures strongly one way or the other. The Occupy Wall Street movement is now gaining in London, Europe, Asia and Australia.
On 10/24/11, Monday, futures gain buoyancy since no bad news has occurred form the EU Summit meeting, the can is kicked down the road until the Wednesday meeting. Positive CAT earnings and guidance keep futures elevated. Markets finish up on the day.
On 10/25/11, Tuesday, weak MMM and UPS earnings and guidance hurt futures. One of Keystone’s Secular Signals uses UPS, which continues to forecast a secular bear market; shipping is a vital barometer to the overall economy. The markets sell off at the bell, then minutes into trading, the Eurozone Finance Ministers (27 countries) announce that there will be no meeting tomorrow; the markets tank. This is not the actual EU Summit (17 countries) meeting tomorrow but it does suggest a delay in reaching an agreement is occurring. Italy is watched closely by traders with Berlusconi’s comments and behavior hurting the situation with Merkel and Sarkozy. At 10 AM EST, one-half hour into trading, a European official states the Euro FinMin meeting was never firmly planned to take place. The markets took solace in this news and although down, the markets moderate sideways.
On 10/25/11, as trading proceeds, the Consumer Confidence number is 39, a reading in the 30’s! Markets sell off large. The SPX drops 25 points, or 2%. The Dow Industrials fall 207 points, or 1.7%. During the evening, the Dutch Finance Minister downplays the results from the Summit tomorrow blaming the Anglo-Saxon press for fueling all the recent hype and high expectations. He is referencing talk of using a bazooka a la Paulson handling the U.S. crisis in the Fall of 2008.
On 10/26/11, Wednesday, markets await the EU Summit results today. A German vote passes providing Merkel’s marching orders. The Euro leaders begin the Summit but the news flow is limited and no announcement anticipated until after the U.S. markets close today. The broad indexes jump higher after the opening bell but turn around and tumble back to even. As the day a progress, word hits that China will provide help to solve the Europe debt crisis and support the EFSF. Markets catch a bid on this news and move higher during the afternoon into the close with the major indexes up about a percent or more on the day.
On 10/27/11, Thursday, overnight, Europe provides a triple resolution after a 10-hour marathon Summit session. The EFSF lending capacity to be raised to 1 trillion euro’s from 440 billion euro’s. Banks and insurers agree to a 50% loss, or haircut, on their Greek government bonds. Bank recapitalization plans are provided as well; not too large as to hurt the banks, but not too small to disappoint. Trichet says this is a time for “no complacency, hard work now.” The futures jump higher on the euphoric news, the S&P up 20 handles and the Dow Industrials up 160 handles. Details will be needed, however, as to how the EFSF will be leveraged up, how the Greek haircut will take place, and information on the bank recapitalizations. Better than expected GDP data further encourages bulls.
On 10/27/11, at the opening bell, the S&P catapults over 30 handles in the first four minutes. The Dow shoots up over 250 points and the Nasdaq up over 50 handles. The entire session is a wild bull orgy. The SPX closes up 43 points, or 3.4%. The Dow Industrials close up 340 points, or 2.9%. The Nasdaq closes up 88 points, or 3.3%.
On 10/28/11, Friday, China is open to providing 100 billion euro’s to support the expansion of the EFSF. China talks a lot but has yet to place any substantial dough on the table. Italy 10-year bonds moving up towards 6% so the party from yesterday is over. Fitch rating agency says the 50% Greek bond haircut would be a default event. The markets move in a tighter range, now that volatility has dropped significantly over the last day, and close flat. The markets close up for another week, the major indexes are above their starting year numbers and positive for the year now. Bullish euphoria is ruling the day, copper is up over 20% in the last six days, an epic run, and the markets are set to break records for the upside move for the month of October. All this euphoria is built on the euro debt crisis resolution, but, stepping back, there are no details for the plan as yet, and the final-final deadline is this week with the G20 Summit “Kick the Cannes” meeting Thursday, 11/3/11.
………………………the saga continues…………..
Looking ahead,
Eurozone problems continue. Global recovery is stalling. China bubble popping. Copper and commodities languish, but do print stellar recoveries in recent days. Semiconductors, retail, utilities and financials are the main pillars of support for the markets currently. The lower volatility and elevated copper price joined the bull fun last week. The market bulls have momo currently.
Another big earnings week is on tap. About 75% of companies were beating estimates but weak numbers last week dropped these projections into the 60’s.
On 10/31/11, Halloween, manufacturing data will provide clues on the economic recovery, or lack thereof, with Chicago PMI and Dallas Fed Mfg Survey. Today is EOM, the month-end prints occur at 4 PM. SPX 1277-1278 is extremely important—a close above will embolden bulls, a close below today and the market bears will show they continue to remain in control of the markets overall.
On 11/1/11, ISM Mfg Index (proxy for energy, watch XLE and energy stocks) and Construction Spending (proxy for employment).
On 11/2/11, Challenger and ADP Employment reports start the hype for Friday. Oil Inventories at 10:30 AM. FOMC meeting announcement 12:30 PM followed by Chairman Bernanke’s “Desk” Conference at 2:15 PM.
On 11/3/11, ECB Rate Decision and meeting, Draghi now in charge, Europe should announce rate cut, Jobless Claims. Factory Orders. Deadline for the Merkozy plan to save Europe and prevent contagion as G20 Summit kicks off.
On 11/4/11, Monster employment numbers and then the Jobs Report circus before the bell.
On 11/13/11, Troika decision.
On 11/23/11, the Deficit Commission deadline looms.
On 12/13/11, FOMC meeting.
On 12/23/11, Congress will conduct the debt vote. Merry Christmas.
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