On 2/17/12, Friday, the markets remain buoyant and traders focus on Dow 13K and the 2011 highs for the SPX. The Dow closes above the intraday HOD from 2011 at 12928, this is now the highest level for the Dow since 5/19/08, four years ago, and a big feather in the bulls cap. The SPX, reflecting the broad market better, however, remains stubborn, falling short of closing above the 2011 closing high at 1263.61. Watch SPX 1263.61 like a hawk as this drama picks up again next week.
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On 2/19/12, Sunday, Eurozone leaders begin meetings, thru teleconferencing, to resolve the Greece crisis by Monday.
On 2/20/12, Monday, U.S. bond and equity markets are closed for Washington’s Birthday and President’s Day holiday. The Greece drama plays out when an agreement is reached in the wee hours of the morning. The new Greece bailout package helps to calm markets and create buoyancy with the euro.
On 2/21/12, Tuesday, the U.S. markets reopen after the holiday and after a happy start due to the Greece resolution, the broad indexes leak lower. Traders realize that Eurozone growth remains a worry as well as implementation of the Greece austerity measures. In addition, European leaders are already saying that further discussion on Greece will need to occur in the near future which sours the perception of the bailout deal. The Dow Industrials poked above 13K intraday but closed below. The euro leaks lower and since the euro and U.S. equities markets are joined at the hip, the markets move lower.
On 2/22/12, Wednesday, the tech sector leads further market downside, from Friday thru today, this is the first time during 2012 that tech is showing a negative face. AAPL, however, continues to move upwards. Since 80 to 90% of the funds or more own Apple stock, it cannot be understated the bullish impact the run in AAPL is having on the broad markets. The broad indexes moving higher are deceiving. Apple stock is a main reason behind the bullish move in the markets. This serves to lull traders deeper into complacency, and low volatility and low put/call ratio’s verify the bull euphoria. Interestingly, despite the analysts and pundits saying they are worried about a pull back, or some commenting that a 3 to 5% pull back is expected in an unconvincing tone, they are not doing what they say. Traders remain happily bullish on the markets and do not appear to be concerned about the downside risk. The broad indexes place the lows for the week in late Wednesday early Thursday trading.
On 2/23/12, Thursday, the E.U. says that Europe’s economy is expected to shrink in 2012, with Italy and Spain a major concern. Fitch rating agency downgrades Greece’s debt to C from CCC. The euro remains buoyant, however, so the markets head higher printing new highs but the SPX is unable to close above the 2011 high at 1363.61 and the Dow Industrials are not yet able to close above 13K. At the close, oil prints a 9-month high at 108. The weaker yen is also an important story this week, the dollar/yen now battling with 80, not seen since last July.
On 2/24/12, Friday, the big focus is oil prices with WTIC printing over 108. The general public is talking more and more about the high gasoline cost, parts of the country now paying over $4 per gallon, which should damper spending. Other countries around the globe would be ecstatic about gasoline at this price but in the States, where larger vehicles are used and longer distances over land are traveled each day, gasoline moving above $4 per gallon creates demand destruction. Talk of an SPR (Strategic Petroleum Reserve) release is bandied about as always occurs when oil prices run higher. The question is will WTIC oil at 110 trigger a release? Perhaps 120 per barrel? Or perhaps Brent up and over 120? Sunday evening trading will show if the 110 level is breached, or not. Treasury Secretary Geithner is encouraging Europe to boost their firewall and make the backstop credible and strong. The Dow Industrials poked above the 13K level again and remained above for about one-half the session, only to leak lower into the close. The SPX closed above the 2011 closing high of 1363.61 and is now at levels not seen since mid 2008, 3 ½ years ago. AAPL finished at the highs of the week up over 522. As AAPL goes, so goes the markets. The charts are set up with negative divergence indicating a smack down for AAPL is on tap now which would take the broad markets lower. The SPX ended the week up one-third of a percent for the week closing at 1366. Portugal and Hungary 10-year yields continue higher all week long indicating future trouble ahead.
On 2/25/12, Saturday, G-20 finance ministers and central bank governors meet in Mexico City. The IMF wants more money to help create a strong support system for Europe, a sturdy firewall, or ring fence, where the risks of contagion can be diminished. This is what Geithner is encouraging. But, Germany, must continually pony up more and more cash to support the countries that enjoyed years and years of wine and roses. Thus, the soap opera playing out this weekend is LaGarde, the IMF, wrestling with Germany as the main event, and, in general, Europe and world nations meeting to find solutions to the European debt crisis and try to establish a strong firewall to prevent contagion, especially in reference to Italy and Spain. The German political talk will noticeably ratchet up in the coming days.
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On 2/26/12, Sunday, the G-20 meeting says……bigger resources? ……bigger firewall?
On 2/27/12, Monday, Pending Home Sales. Watch European bond yields, especially Portugal and Hungary.
On 2/28/12, Tuesday, Durable Goods Orders, Case-Shiller, Consumer Confidence.
On 2/29/12, Wednesday, the odd-ball leap year day today, and EOM. GDP, Beige Book. Chairman Bernanke testifies in front of Congress. The LTRO decision is critical today and the most important trading item for the week. The first LTRO created a 10% jump in the SPX and 20% jump in the DAX over the last couple months. If this second LTRO is under 500 billion euro’s the markets will not be happy since this is not enough crack. The euro will likely weaken. Between 500 billion and 600 billion would satisfy traders but provide limited upside for equities except for an initial pop. Shock and awe should occur above 600 billion euro’s since this is plenty of crack cocaine for markets to continue higher in the near term. Much of the LTRO is probably priced into markets already. Estimates and outcomes are all over the place, only a couple weeks ago the trillion number was bandied about.
On 3/1/12, Thursday, Jobless Claims, Personal Income and Outlays, ISM Manufacturing Index (watch the energy market). European leaders meet in Brussels today and tomorrow to discuss funding for the ESM (European Stability Mechanism).
On 3/2/12, Friday, …..
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