On 4/20/12, Friday, GE and Mickey D’s (MCD) earnings are great which helps continue the bullish vibe. The markets start off higher but drift lower as the session continues. AAPL loses critical support at 580 and steadily falls into the close, price is now 10% down off the top. Financials weaken. The SPX is below the 50-day MA. Traders are anxious ahead of the weekend with the key France elections and China PMI on tap. The markets finish flat on the week. The top in the markets occurred on Tuesday afternoon when the IBM and INTC earnings were released and the markets have drifted lower ever since.
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On 4/22/12, Sunday, France election Round One results show that Sarkozy loses to Hollande, the socialist, as expected. The Round Two runoff election will occur Sunday, 5/6/12. The futures markets sell off a couple S&P points but the outcome was anticipated since last week. The more important news overnight is the HSBC China PMI at 49.1 which is the sixth consecutive month showing contraction (under 50 is a contracting economy and over 50 is an expanding economy). In addition, diesel imports are down which would verify the decrease in shipping and construction industries. The futures markets tumble lower overnight with the S&P’s down ten firm handles.
On 4/23/12, Monday, a Bradley turn date ushers in market turmoil with U.S. futures markedly lower, the Dow Industrials down over 100 points pre-market. Markets awake to the disappointing low HSBC China PMI but more importantly, the negative news out of the Eurozone. The Dutch are failing to agree on budget cuts sending the Eurozone into a tailspin. The Netherlands is one of the countries helping to prop up the Eurozone so problems with their government and path forward weaken markets. Germany’s manufacturing data is slowing. The IMF receives 430 billion in additional pledges to help support Europe, but nothing form the U.S. or Canada. China promises to provide funding but will not commit until they see austerity in Europe. How many pledges will actually become cold hard cash contributions? Spain’s GDP falls and signals that a recession is occurring. The Italy market is down 3% with Spain close behind. The France-Germany 10-Year Yield Spread blows out to 143 and growing; the Netherlands-Germany Spread grows to 73 the highest since 2009. Spain 10-year yield is 6% with Italy printing over 5.8%. France 10-year yield is at 3.10% ten basis points higher than last week. As if all this dire news is not enough, WMT is now mired in a bribery scandal concerning their Mexico units, which were the highest drivers of growth the last few years. On the earnings front, 85% of the companies have beat on earnings thus far, but the expectations bar was lowered to the point that it is now sitting on the floor and even Grandma Edna has no trouble stepping over that bar. Earnings expectations are becoming irrelevant. The Dutch government will resign en masse after the austerity fiasco today. Jittery markets grow weaker.
On 4/23/12, the opening bell rings. Markets tumble lower with financials and retail sectors weaker and volatility, VIX, spiking above 20. Keystone’s SPX:VIX Ratio Indicator drops under 68 which verifies the large down day on tap but after the first couple hours of trading moves back above 68 showing that the bulls are fighting back and the downside may not be sustainable. The day ends with the SPX down 12 points or -0.8%. The Dow Industrials are down 102 points or -0.8%. The Nasdaq is down 30 points or one percent back under the 3000 level. NFLX misses earnings after the bell and takes the pipe. Texan (TXN) earnings are in line. Facebook announces lower profits while expenses are increasing. Users are now at 900 million.
On 4/23/12, Keystone’s proprietary trading algorithm, Keybot the Quant, turns bearish flipping to the short side at 9:57 AM EST at SPX 1362. A weak financial sector and volatility spiking higher helped trigger the move.
On 4/24/12, Tuesday, Moody’s reaffirm’s the Netherlands triple A rating and this helps calm the European bond markets. Futures are up until weak housing market pushes the broad indexes into the red. FOMC Two-Day Meeting begins. Markets are in a holding pattern ahead of AAPL earnings after the bell. Apple is the markets. After the close, Apple produces strong numbers although the top line and iPad sales were light in comparison to the highest estimates. In previous quarters AAPL always beat all estimates but not this time. The earnings, however, are received extremely positively. 35 million iPhones is an impressive number matching the highest estimates. Futures explode higher especially the Nasdaq, er Nasdapple, setting up Wednesday to be a strongly bullish day for markets.
On 4/25/12, Wednesday, AAPL earnings create a gap up open and strong day ahead. FOMC Rate Decision and Press Conference occurs and Chairman Bernanke mentions the word ‘accommodation’ (more quantitative easing coming) so markets finish the day printing at the highs. The day ends with the SPX up 19 points or 1.4% to 1391. The Dow Industrials are up 89 points or 0.7%, over the 13K level. The Nasdaq was the big winner up 68 points or 2.3%, back over the 3000 level.
On 4/25/12, Keystone’s proprietary trading algorithm, Keybot the Quant, turns bullish flipping to the long side at 11:59 AM EST at SPX 1387. The financial sector recovers and volatility tumbles lower reversing the bearish move from Monday. All the major sectors are in the bull camp except for copper, commodities and semiconductors which require close watching moving forward. Further market upside will occur if any of these three sectors move higher and rejoin the bulls. The upside will be limited if these three sectors remain bearish.
On 4/26/12, Thursday, Eurozone confidence drops which sends the futures markets lower. An Italy debt auction does not go well and Italy and Spain yields jump higher. Jobless Claims move higher continuing this recent trend higher. The dollar is weak, however, so commodities and especially copper move higher taking the broad indexes higher with the SPX closing the day two pennies away from 1400. After the close, S&P rating agency downgrades Spain debt two notches with a negative outlook moving forward. S&P futures move four points lower and are weak into the overnight session.
On 4/27/12, Friday, the European bond market reaction to the Spain downgrade is muted since it was not a surprise. Spain unemployment is over 24%, one in four people do not have a job. The Spanish banks are weak. Samsung Galaxy smartphone outsells Apple’s iPhone in Q1. Samsung is the leader in Smartphone sales. Foxconn, Apple’s production arm, plummets 16% this morning stating that demand is weakening. GDP comes in light at 2.2%. After all the Fed easing, Operation Twist, and the LTRO’s from the ECB, a world awash in liquidity and easy money, the GDP could only muster up a paltry 2.2% is a sad commentary on economic health. Markets remain on a sugar high from AAPL earnings, as well as blowout AMZN earnings, however, ignoring any bad news, and punch higher to finish out the week. Besides, bad news is good news in these bizarre markets since traders are now trained to expect more quantitative easing if the news is bad thereby sending markets higher. The party atmosphere, with euphoric bulls very complacent, continues into the weekend. The SPX closes above 1400 for the first time since early April. The broad indexes are up about 2% on the week with the tech sector moving much higher. This week is dubbed the Apple Rally week. Semiconductors and copper are the two most important sectors to watch right now.
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On 4/30/12, Monday, EOM. Lots of Fed speakers on tap every day this week. Earnings continue.
On 5/1/12, Tuesday, ISM-watch energy markets.
On 5/2/12, Wednesday, …. Challenger and ADP provide early reads on employment numbers ahead of Friday.
On 5/3/12, Thursday, …. ECB Rate Decision 7:45 AM and Press Conference 8:30 AM. Jobless Claims. Federal Reserve Presidents speak 11 AM.
On 5/4/12, Friday, Jobs Report. Traders must finalize positions Friday afternoon ahead of the weekend European election turmoil. The futures markets will react overnight Sunday and the U.S. markets will immediately move as the opening bell rings on Monday.
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On 5/6/12, Sunday, the France runoff election occurs and…… The Greece elections also occur and are important since the government has to pass spending cuts as per loan agreements and austerity promises.
well put KS, well put! The complacency and 1-stock focused markets actually scare me. I think this is going very badly eventually. (Stock) Prices are simply higher because the Dollar is worth less and less; not because things are going gang busters. All economic indicators are throwing alarm signals and everybody keeps on dancing; titanic moment all over again???
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