Moody's lowered France's rating but the effects are muted since they are playing catch up to S&P's downgrade that occurred in January. France's 10-year yield climbs to 2.11%. Spain's 10-year yield is at 5.9% remaining under the 6% providing Rajoy no incentive to ask for a bailout. Italy's 10-year yield is 4.91% and Germany 1.38%. The euro dropped on the news last evening but has since recovered overnight and back above 1.28. Use the euro 1.28 as a guide, equities markets will be bouyant today if the euro is above 1.28, markets will weaken and sell off if the euro falls under 1.28. The Greece decision is due at anytime. The euro will react and take the markets in the same direction. The equity rally yesterday was likely a result of the pending Greece resolution as well as Chairman Bernanke's speech today at 12:15 PM EST, rather than any fiscal cliff happy talk. Bernanke may promise more crack cocaine stimulus today. The Fed's QE3 Infinity has already failed. The SPX is far below where this stimulus was anounced at 1439. The Fed offering a QE4 today is absudity. Information on the future of Operation Twist is most important today. If Bernanke avoids the topic markets will sell off.
The Israel-Hamas War continues with rockets now fired at Jerusalem. Things were calmer a few hours ago but the intensity may be ramping up again. Watch the 10-year yield today, now at 1.62%, which showed that money was not moving from bonds to stocks yesterday. The low CPC put/call last evening at 0.75 verifies, along with the VIX, the uber complacency in the markets. This is also evidenced by the relatively well-behaved selling volume during the recent downtrend. There was never any panic, captulative-type selling. The market rally yesterday was definitely not climbing a wall of worry, as the old Wall Street adage says. The markets were running higher on optimism and traders believeing the Fed will support markets forever, simply a total lack of fear that markets will go down. Of course, the opposite typically occurs. The uber high NYAD +2500 print and uber low TRIN readings yesterday show an over-the-top bull run yesterday so markets simply need to snap-back with some selling to relieve this extreme bullish pressure.
The Housing Starts at 8:30 AM is a key economic indicator each month. If you only a follow a few releases, the Monthly Jobs Report, Housing Starts, Consumer Confidence and Consumer Sentiment are top tier indicators that move markets to a greater extent than other data releases. The Fed's Lacker speaks at 9 AM and Bernanke at 12:15 PM. Keystone's Key Events missive on each weekend lays out the road map with economic data and events so scroll back a few pages for that post, or type 'Key Events' into the search box above, or find it listed in the lower right margin to reference this information throughout the trading week. Markets tend to be buoyant in front of the holiday but these are not regular markets anymore. The retailers keep pushing forward their hours on Thanksgiving Day. Hey, why have Thanksgiving at all, they may as well abolish the holiday in favor of working 24/7. This behavior in the retailers smacks of desperation. The holiday store traffic is simply not there and folks plan on pinching pennies this year. The top lines on earnings releases continue to miss, people are not spending money like the prior quarters. Keystone expects the usual lump of coal in his Christmas stocking.
The key parameters that will dictate broad index direction today are VIX 15.95 (now bullish at 15.24), XLF 15.62 (now bearish at 15.57) and RTH 43.94 (now bullish at 43.98). Whichever way these parameters move will dictate market direction today. Especially watch RTH 43.94 at the opening bell since this flipped bullish with only seconds remaining in yesterday's session, thus, the first few minutes will immediately tell you if the RTH switch to bullishness is real, or phoney baloney. If RTH stays above 43.94 and XLF moves above 15.62, the bulls will be on their way thru SPX 1391 and onward and upwards to the low 1400's. The bears need to push RTH back under 43.94 right away, and then work on bringing the VIX back above 15.95 to stop all the upside momo. For the SPX today, the bulls only need a smidge of green in the futures, and that smidge is now in place, and an upside acceleration will occur with a quick test of 1391 resistance. Bears are simply trying to stop the upside with the RTH and VIX as described and also push the SPX back under the 150-day and 200-day MA's, 1384.44 and 1382.48, respectively. The 10-month MA is 1387 which held yesterday; the 1382-1387 resistance gauntlet remains in play today. Bulls win above 1387, bears win below 1382.
Note Added 11/20/12 at 7:47 AM: HPQ is takin' the pipe. The bottom line beat on earnings but the top line slightly missed and guidance is lowered. The big news is with the Autonomy takeover and alleged fraud with the transaction. So that will be a soap opera today. Keystone will assume the position behind the shed for HPQ today. The kitchen sink is being thrown at HPQ now. Sounds like HPQ may file a lawsuit in the future. The euro just lost 1.28, now printing 1.2797.
"This behavior in the retailers smacks of desperation. The holiday store traffic is simply not there and folks plan on pinching pennies this year. The top lines on earnings releases continue to miss, people are not spending money like the prior quarters." Have you seen PETM earnings? This is a capitalistic consumerist society and the disease gets worse no matter what. If retailers were cutting back their hours and days, what would be the verdict then? No ones's buying? They are increasing hours and opening times because people are salivating more than ever. What else is their to do in a society such as hours? Consume. Shop. I love this sentimentality for some Rockwell-esqe Thanksgiving. The holiday has been de-generating since it was started. We wasted an entire people and culture of Native Americans so we can have our sweet holiday and now we are so concerned that it is de-generating into a consumer feeding frenzy. When were we Americans about anything more than consumerism and phony bologne economics and culture.
ReplyDeleteThank you. I could write a rant on that very topic, but I don't want to monopolize Keystone's blog. I already found it disappointing that the Christmas items were out in the store before Halloween (it's now a whole damn season). You can only hear "Rocking Around The Christmas Tree" so many times before you go certifiably insane (there's actual case studies). For years, Thanksgiving had escaped all of that. It was the one holiday that you could get behind: food, family, alcohol. Now, the retailers have decided that Black Friday should actually begin on Thursday evening, which means that some poor schmuck working for $9 an hour won't even get food, family, and alcohol this year (because he'll have to get up early to make sure the shelves are stocked). As a business person, I understand profit, but when the want of money gets in the way of everything else, when you can't even take one day a year to turn off all the noise, then it's just pathetic.
DeleteIt's now becoming clearer. We live in a world where a Twinkie can sell for $5,000 on Ebay (seriously, check it out, lots of them) and where Apple can move $50 points based on nothing more than the Ghost of Christmas Past. For a good number of years, I partially bought into the fundamental story, that there was an underlying rationale, but it's becoming clearer that it's giddy mood music. Let's get together and decide whether we want to be happy or sad, optimistic or pessimistic. It's that "Wonderful Life" moment when George Bailey decides that he actually wants to live. FYI, I would have written that story completely different.
ReplyDeleteThe RTH 43.94 is key today and that is exactly where it sits right now at 9:52 AM. That willprovide a great gauge gonig forward ot see how the shopper is doing. There will be positive stories from some retailers but overall, the holiday season does appear to be starting off on a shaky footing. The sales are another tell. Note how the sales are cropping up everywhere lately, plus receiving offerings in the mail, this is typically a troubling sign for retailers. The next couple weeks will tell a lot.
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