On 10/5/12, Friday, the Nifty Index (India) is halted for 15 minutes after it plummets 16% in a heartbeat, a mini flash crash. These flash crash events are becoming more and more frequent and are now global; the KFT debacle occurred this week. Riots in Iran increase as the international sanctions cut deep. World leaders say that the Iranian government mismanagement is to blame. Iranian inflation is starting to escalate exponentially now running at 25% and one analyst says the inflation rate has actually jumped to 70% per month. The Spanish Finance Minister Luis De Guindos says “Spain does not need a bailout.” The audience in the room laughed. Guindos made the case that it is a question of scale where small help is welcomed but not the full-fledged bailout. The global news wires, however, simply pump the news that ‘Spain says no to bailout’ which creates jittery markets. Italy and France leaders are meeting with Spain to convince them to take a bailout. Obviously, they are more concerned about their own skin. If Spain requests a bailout, the ECB will institute bond-buying so the yields would drop, benefiting Italy and France. Rajoy’s (Spain) popularity drops ahead of the Galicia and Catalonia regional elections this month. A Spain bailout request is not likely until late this month after the elections. The Monthly Jobs Report shows that 114K jobs are created with a 7.8% unemployment rate. The consensus was 115K jobs and 8.2% rate. The 7.8% rate sends shock waves around the country and on trading floors. The lower rate ends the 8% plus number for the last 44 months in a row. The conspiracy theorists have a field day since the sub 8% number helps the President’s reelection campaign. The rate is now below when the President took office and is also under 8% so a republican talking point can no longer be used. Former GE CEO Jack Welch sends a tweet feeding the conspiracy talk; “Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers.” The conspiracy talk continues all day long into the evening about the fixed numbers that come from the BLS (Bureau of Labor Statistics). The jobs report today lived up to its billing as the most important economic data release for the whole entire year. The November jobs report is only three days in front of the presidential election so all eyes will be watching the rate number. S&P futures are up seven points. Germany’s Merkel announces a trip planned to Greece for Tuesday, 10/9/12. That is a brave woman heading into the hornet’s nest. Obviously, her trip signals that she wants Greece to remain in the euro, and perhaps she is concerned about her reelection possibilities next year, and also, to add to the drama, she is concerned about her legacy and wants to be known as the Iron Lady of Europe, not the lady that took down Europe. Greece Prime Minister Samaras warns of societal disintegration without urgent financial aid and says Athens will run out of money by the end of November if it does not receive the next bailout. Greek rioters attack and break thru the Defense Ministry grounds. Greek farmers use their tractors to block an airport in Crete. Rioters say that demonstrations will be planned to protest Merkel next week. The broad indexes bounce higher at the opening bell on the happy 7.8% unemployment rate. The SPX punches up thru the closing high for 2012 at 1365.77, however, the markets leak lower closing flat on the day and the SPX cannot print a new closing high. For the week, the SPX is up 1.4% to 1461. The Dow Industrials are up 1.3% to 13610. Tech is lagging the broad markets with the Nasdaq up 0.6% on the week to 3136. Note the lag in small caps as well with the RUT up only 0.7% on the week to 843. Also, traders are reluctantly buying the markets as evidenced by a preference to buy utilities, healthcare and consumer staples. This is not a healthy stock market.
On 10/6/12, Saturday, students clash with riot police in Italy taking to the streets to protest austerity. In one incident, rioters attempt to take over a police van resulting in many injuries. Three major cities erupt in violence.
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On 10/7/12, Sunday, Venezuela elections occur with Chavez expecting and receiving reelection. Rajoy vows to ‘meditate’ on a Spanish bailout.
On 10/8/12, Monday, China returns from the week-long holiday and the Shanghai sells off 0.6%. The World Bank downgrades the estimates on Asian growth placing world markets in a negative mood. Eurozone Finance Ministers meet to discuss Greece aid. The ESM Inaugural Meeting occurs. Earnings projections for U.S. companies in Q3 are the weakest since the recovery began over three years ago. The S&P futures are weak overnight with commodities leading the way lower. Oil drops under 89. The euro falls under 130. Today is the Columbus Day holiday where U.S. banks and bond markets are closed but the stock market is open. AAPL drops on rumors of a production shutdown at Foxconn in China and drags the overall markets lower. The SPX moves thru the 1453-1457 range all day long.
On 10/9/12, Tuesday, the IMF and World Bank convene in Japan and the IMF lowers their global growth forecast with a dire report. Merkel travels to Greece to provide moral support in a quickie six-hour visit. Protests increase on her arrival, one group marching in Nazi uniforms. Spain is further pressured to request a bailout. Today is the five-year anniversary of the SPX closing all-time market high on 10/9/07 at 1565.15. AAPL weakness weighs on the tech sector which sends the broad markets lower. Apple led the markets higher all year long but this trend appears to be rolling over. Keystone’s SPX 30-minute chart shows the 8 MA falling thru the 34 MA indicating bearish markets for the hours and days ahead. Keystone’s algorithm, Keybot the Quant, flips to the short side at SPX 1452. The Nasdaq and QQQ drop thru their 50-day MA’s following AAPL’s failure thru this important moving average two days earlier. The broad markets tumble with the SPX losing 14 points, one percent, to close at 1441. The Dow Industrials drop over 100 points to 13474. After the bell, AA kicks off the earnings season by lowering its long term growth forecasts. YUM results are weak for KFC (Kentucky Fried Chicken) in China, verifying China economic weakness, but the Taco Bell franchise, especially in the States, carries the day with strong earnings and boosts the YUM stock price. CMI, an engine manufacturer supplying large diesel motors to companies such as CAT, says the overall global economy is very weak and fires 1500 employees.
On 10/10/12, Wednesday, the markets trend lower especially on the CMI forecasts. The VIX is well over 16 helping the bears. The markets place a low for the week at 1 PM EST at SPX 1430. The SPX loses over 30 handles this week thus far. The IP (International Paper) CEO drops a bombshell during a television interview saying that the paper business in China is suffering and that China’s growth rate may be as low as only 2 or 3% currently, far lower than the 7 and 8% numbers constantly bandied about. He also cites flat electricity usage as verifying the China weakness. After the closing bell, S&P downgrades Spain two notches, to just above junk, with a negative outlook. The markets also continue to expect a downgrade from Moody’s which would materially impact global equity markets moving forward. The euro drifts lower from 129 to 128.90, 128.80, 128.70 and 128.60.
On 10/11/12, Thursday, the Spain 10-year bond yield is at 5.9% approaching the 6% level as borrowing costs rise in light of the Spain downgrade last evening. Brazil and Korea cut rates which bounces copper, commodities and PM’s as the global debasing and race to the bottom continues. The Basel III guidelines for increasing bank capital requirements by January 2013 may be relaxed. This news sends banks and the financial sector higher. Despite the Spain downgrade, the markets focus on the ongoing global central banker easing and the positive Basel III developments bouncing strongly at the open. As the day moves along the air comes out of the financials and AAPL analysts hint that iPhone5 sales forecasts will drop on production issues. The markets give up the opening pop and end flat on the day. After the close, AMD, a top chip maker, further lowers guidance on the back of recent INTC, HPQ and DELL bad news. The weak tech and chip sector this week is negatively impacting the broad markets. In the evening, the first and only Vice Presidential Debate occurs between current V.P. Biden and potential V.P. Ryan. The debate is spirited resulting in a draw with a slight edge going to Ryan due to Biden’s laughter and interruptions. The futures are up after the debate.
On 10/12/12, Friday, the IMF says leniency should be provided to Greece but Germany says Greece does not deserve more time to meet its austerity goals. The EU wins the Nobel Peace Prize. The IEA says oil supplies will increase while demand will decrease for the years ahead. JPM earnings beat estimates but WFC earnings are lackluster. Both banks turn negative as the opening bell rings. The markets bounce at the open into the upbeat Consumer Sentiment number at 10 AM which marks the top for the day. The broad indexes drift lower into the closing bell. Telecom, tech and semiconductors are weak. The retail sector moves lower. The VIX moves above 16. The SPX closes at the 50-day MA at 1429. Ditto the Dow Industrials at 13329. The RUT (small caps) closes at 823 under its 50-day MA. AAPL, the Nasdaq and the QQQ’s are all under their respective 50-day MA’s. Tech and small caps lead the markets. Gold loses 15 bucks to 1755. For the week, the SPX falls -2.2%, the Dow falls -2.1%, the Nasdaq drops -2.9% and the RUT falls -2.4%.
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On 10/14/12, Sunday, Fed Chairman Bernanke speaks in Tokyo.
On 10/15/12, Monday, Retail Sales. Markets will be listening for a potential Moody’s downgrade of Spanish debt. The Spain bailout drama is ongoing but a request will likely not occur until later in the month. New moon.
On 10/16/12, Tuesday, CPI and Industrial Production. Second of three Presidential Debates Obama v. Romney.
On 10/17/12, Wednesday, Housing Starts.
On 10/18/12, Thursday, ECB/Euro Summit. Merkel may continue to avoid a decision on Greece until an entire package can be developed to address Spain, Greece and Cyprus all at the same time. Merkel wants Greece to stay in the euro so Europe does not fall apart before her reelection campaign next year as well as her trying to preserve a legacy as the Iron Lady of Europe not the lady that collapsed the euro. The banking union will receive a lot of attention and must show progress; is the outline for the proposed banking union acceptable? Philly Fed.
On 10/19/12, Friday, Existing Home Sales. OpEx.
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On 10/21/12, Sunday, Spain regional elections.
On 10/22/12, Monday, third and final Presidential Debate Obama v. Romney.
On 10/24/12, Wednesday, FOMC Rate Decision.
On 10/26/12, Friday, Consumer Sentiment.
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On 10/30/12, Tuesday, Consumer Confidence.
On 10/31/12, Wednesday, Halloween. EOM.
On 11/2/12, Friday, Monthly Jobs Report—last report before the election.
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On 11/6/12, Tuesday, U.S. Presidential Election Obama v. Romney, the result will be known in the evening from 9 PM thru 12 PM EST.
On 11/8/12, Thursday, the new China Premier Xi Jinping is officially selected and named the Head of Party, but, where is he? The transition of China leadership begins with China holding the 18th Party Congress.
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On 1/1/13, Tuesday, ESM is officially up and operating.
On 1/2/13, Wednesday, if Congress does not act, the U.S. hits the ‘massive fiscal cliff’ (a phrase coined by Chairman Bernanke in early 2012) that will cut the GDP, increase unemployment and immediately launch the country into recession, but, on the positive side, the nation’s debt will decrease. Bernanke states on 9/13/12 that the Fed does not have tools to handle the fiscal cliff, should it occur.
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In February or March, new China Premier Xi Jinping is named Head of Government and takes over complete control.
Would you expect October 16th then to be a bottom and we rally to new highs by the next Bradely Turndate Nov 1 being a top?
ReplyDeleteAnon, you are not thinking about the overall picture in the right context. All the seasonality factors, Bradley turns, new and full moons and statistical frequency trends and tricks should only be viewed as background currents. Think of all that as the current in a stream. You are on the trading canoe and these background forces gently push the canoe in that respective direction. However, you can paddle the canoe to go in any direction you want just as a tape bomb may hit from Europe that could either rally the markets strongly (Spain bailout request) or cause the markets to implode (Moody's downgrade of Spain debt). So you typically never want to trade directly off these concepts. There are always exceptions, however, and the OpEx market buoyancy from OpEx Tuesday into Wednesday is reliable and that is on deck this week. For anyone new to the site, Keystone publishes the seasonality and other esoteric factors on the first day of eacy month. You can see this months by simply typing in 'October Seasonality ' into the search box above.
ReplyDeleteAll that said, the subtle background currents hint that Monday will be down due to the new moon and the trend of down Monday's. Tuesday into Wednesday should experience some market buoyancy due to OpEx. We cannot say much more than that. These markets are very treacherous this year so you got to take it all hour to hour.
Concerning the highs, we may have seen the highs. Remember the CPC put/call chart we watched with illustrated the uber complacency and predicted the spankdown which has now occurred. There is more and more talk about the fiscal cliff and considering that long term buy and hold folks are up big this year, only a fool would not cash in and take the profits; this may add to significant market weakness moving forward. The QE3 bazooka is there but the firepower is questionable.
With weak utilites and semi sectors continuing, there will be no higher tops. The weak trannies may also be coming home to roost. Retail Sales is Monday where it all may hit the fan. Copper and voaltilty are on the verge. If the VIX leaps higher, which should be expected moving forward, the broad indexes will plummet.
To keep it simple, watch to see if UTIL stays under 478.43, if so, the bears will continue sending markets lower. If RTH loses 44.40, or JJC 46.25-ish, or VIX moves above 16.90-ish, that guarantees the SPX in the low 1400's and perhaps a break into the 1300's. Pay a lot of attention to the 200 EMA on the 60-minute chart that Keystone talks about, if price is under here, bears rule, period. If the SPX moves above here (1440), ther will be an upside rally, but it may be a short-lived pop.
The selling is doing damage to the markets, it is not a simple down move, if RTH, JJC or VIX go into the bear camp, that seals the markets fate for continued lower prices moving forward.
Another eclectic indicator of interest is Keystone's Eclipse Indicator and this points to a major market sell off to occur anytime now thru the first week or so of November. This eclipse indicator nailed the market top in late April where the SPX dropped from 1415 to 1270 during the month of May. All we can do is take things day by day, hour by hour.