On 11/2/12, Friday, the euro collapses under 1.30 overnight. The key 128.80 level gives way in the early morning hours in the States. The BOJ intervention is weakening the yen so the dollar/yen pair is moving higher, which moves the dollar basket higher, $USD, and in turn weakens the euro. The higher dollar slams commodities and especially copper. The Monthly Jobs Report, the last report before the presidential election, is released at 8:30 AM EST, with 171K jobs (above the 125K consensus) and 7.9% unemployment rate (consensus was 7.9%). Hourly wages are down and hours worked are flat. If companies are not paying higher wages to current workers, and the hourly hours are not rising, that tells you there is no need to hire any new employees, the existing employees are handling the workload fine. The 171K is positive news, but a recovery needs over 300K jobs per month. In addition, 150K jobs are needed to simply keep pace with potential new employees entering the workforce such as college graduates. The numbers are very worrisome. Futures bounce on the news but are not overly exuberant; the S&P’s are up about six, and also tech is not leading the broad markets higher. The jobs report hints that QE is perhaps less needed, even though a 171K number is nothing to write home about, along with the higher dollar, pushes gold under 1700. The euro drops to 1.2852. At the opening bell, the semiconductors bounce and then fall on their sword. Volatility, VIX, drops to 16 (market bullish) but then bounces strongly (bearish). Commodities are dropping on the higher dollar and copper is getting crushed. Dr. Copper, perhaps the main bellwether of the global markets, will need to treat his severe wounds this evening. The SPX jumps to punch thru Keystone’s SPX 60-Minute Chart with 200 EMA Indicator at 1432, but only for a few minutes, and also tests the 50-day MA at 1434. The SPX immediately collapses. The iPad Mini is on sale but the lines are far shorter than other Apple product releases. The Apple stores take on a surreal affect with employees performing traditional cheers for patrons, but, there are more employees than customers in the stores. AAPL is negative from the opening bell and tests the 200-day MA at 588, which fails. Apple drags down the Nasdaq. The euro drops to 1.2842 approaching the key 1.2830 level which is strong support and the 200-day MA. The utilities sector is weak. At 2 PM EST, the SPX loses the strong support at 1424. The euro falls thru the 200-day MA. Apple collapses now down 15 bucks. Small caps are collapsing with the RUT now down over one percent. The SPX drops to the strong 1419 support, and fails. Oil falls under 85. The VIX is over 17. The Dow Industrials have now dropped 200 points off of today’s high print. AAPL is down 20 bucks to 576. The news outlets are running video and stories on the Hurricane Sandy disaster non-stop. The devastation is overwhelming. The gasoline lines stretch on for miles. Folks continue to search for the missing. The help is slow in coming. The situation is deteriorating with each passing hour. Meanwhile, runners preparing for the New York marathon only yards away from devastation are in a festive mood, running practice runs since Mayor Bloomberg is resolute in holding the marathon. Even the marathon committee is not fully on board with this decision considering the human tragedy unfolding. Outrage develops when three large boxcar size generators are shown in place for the marathon; these generators could supply electricity to a few hundred homes instead. Truckloads of bottled water sit at the marathon staging grounds and even cases of booze are stacked ready for the drunks to drink during the festivities. Bloomberg buckles under the pressure and at 5 PM EST announces that the marathon is cancelled. New York, New Jersey, Connecticut and Pennsylvania, as well as other East Coast areas are a mess with this confusion adding to the market weakness. The SPX loses 13 points, 0.9%, to 1414. The Dow Industrials lose 139 points, 1.1%, to 13093. The Nasdaq is down 38 points, 1.3%, to 2982. The RUT is down 13 points, 1.6%, to 814. The broad indexes finish flat to negative on the week. The markets gave back all of Thursday’s gains. Gold is at 1678. Tech, and the small caps, lead the markets lower today, which is bearish. The copper collapse is very bearish.
On 11/3/12, Saturday, the hurricane tragedy continues with the death toll now over 100. The situation continues to deteriorate but Bloomberg and other leaders pat each other on the back at how great a job they are doing. This fuels further outrage. Damages may now exceed 50 billion dollars. The tragedy is heart-breaking.
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On 11/5/12, Monday, the Greece debt talks are not going well. Merkel (Germany) says that the euro debt crisis may continue “for another five years.” Further, “we have to hold our breath for five years or more,” and “whoever thinks this can be fixed in one or two years is wrong.” The euro drops thru the important 1.2830 support, then thru the psychological 1.28 level. The German 2-year yield turns negative indicating that investors continue to seek perceived safety in these troubled times. The broad indexes are weak at the open. The utilities sector, UTIL drops thru 50-week MA, a very dire market signal where a large market move lower is now expected at any time. Keystone’s SPX 30-minute chart shows the 8 MA stabbing down thru the 34 MA indicating bearish markets for the hours and days ahead. AAPL is up which is keeping the Nasdaq elevated and preventing a dramatic selloff. The COMPQ wrestles with its 200-day MA. Keystone’s UPS 20 and 50-Week MA Cross Indicator shows the 20 stabbing down thru the 50 which now signals a Cyclical Bear Market ahead. The last signal was in January when the indicator verified the Cyclical Bull Market ahead. The bulls pump the semiconductors which helps drive markets higher in to the close with the major indexes finishing on the positive side. Traders try to determine who will win the presidency based on stock moves. The healthcare sector behavior today reflects an Obama victory. Utilities, telecoms and REIT’s, the dividend stocks, are selling off which also hints at an Obama victory. If Obama wins, capital gains taxes will jump higher so traders are cashing in now to take the smaller tax hit before the year ends. However, both candidates will likely raise taxes so traders may simply be booking profits for 2012. The dollar is stronger which favors a Romney victory since less QE would be expected. Coal stocks are higher today also favoring Romney. The too-big-too-fail banks are selling off which probably will occur under either candidate since Romney would favor regional banks over the big boys, and Obama will increase regulation on the big banks. Traders worry that even after a winner emerges, the bipartisan atmosphere will continue. The two-party system has polarized and ruined America. Both candidates are Keynesians that promote war so it is of no real consequence who wins.
On 11/6/12, Tuesday, the RBA leaves rates on hold which surprises traders, the Aussie dollar jumps and promotes the risk-on trade, copper and commodities move higher. The S&P futures are up four. European auto sales are weak with VW and BMW bearing the brunt of the negativity. The euro drops to an 8-week low at 1.2763 but recovers to the psychological 1.28 level. Greek workers go on strike ahead of an austerity vote and the Monday deadline for a debt deal. Hollande (France) pledges to cut spending next year and also increases the VAT sales tax breaking that promise to the people. U.K. and European manufacturing data is weak. The U.K. economy is weaker than thought. The market’s rally strongly as the U.S. votes for president. Traders are sending markets higher anticipating a potential Romney upset. The broad indexes are up about one percent to finish the day. Keystone’s SPX 30-minute chart shows the 8 MA moving up thru the 34 MA indicating bullish markets for the hours and days ahead. The presidential election results begin at 7 PM EST and immediately Virginia and Florida are too close to call. Florida should have went quickly for Romney so this hints at trouble for Romney ahead. The battleground states are all too close to call. At about 10 PM EST, Wisconsin goes for Obama and the air immediately deflates out of the republican bubble. Wisconsin is Paul Ryan’s home State so this places a nail in the coffin for the Romney-Ryan ticket. The futures markets sense the Obama victory and plummet with the S&P’s down 15 and the Dow Industrials off over 100 points. Then Pennsylvania goes for Obama, then New Hampshire, and it is obvious that Obama is riding the chariot to victory. Around midnight, Ohio goes Obama’s way so the election is over. Obama wins by securing the East Coast and West Coast votes (the liberal cities), and the northern central States due to his government bailouts of the auto industry. Romney congratulates Obama on a hard-fought campaign. The constant barrage daily by the press and administration at how Bush should be blamed continually for the economy, even after four years have passed, has stuck with voters. Also, the negative ads painting Romney as a fat cat that does not care about people trained voters’ to view Romney that way. Thus, the people are willing to provide Obama four more years for a full chance at fixing things after the 2008 market crash and financial and real estate bubbles burst. The media played a huge role in re-electing Obama as the main networks, cable outlets, pundits and analysts continually presented Obama favorably and Romney as a robot dolt. The power of the media push in this election cycle is game-changing. The role of media in selecting a president has changed the U.S. forever; this is the first media-selected president in America’s history. People lead busy lives so they simply form their opinions and attitudes based on what the main stream media tells them to think. Romney may have been slightly better for the economy since he understands the dangers of excessive debt, while the president does not care. The general population remains clueless concerning the ongoing U.S. and global dire economic backdrop. The population prefers the coddled socialistic government approach with a redistribution of wealth moving forward rather than the high-achievement and competitive capitalistic landscape that built America for the last 200 years. The people have spoken but the markets will likely sell off on the presidents victory.
On 11/7/12, Wednesday, the wealthy realize they have a bull’s eye on their back due to the president’s reelection so they immediately seek ways to move money out of the country and make other preparations to avoid all the high taxes and other anti-business sentiment that will continue moving forward. The futures sold off once the President appeared the victor last evening but overnight recover to the flat line. At about 7 AM EST, Draghi says that the Eurozone economy remains weak and a slowdown is now occurring in Germany. Germany is no longer insulated from the ongoing debt mess. Draghi also says inflation risks are very low. The euro plummets under 1.28 on the news concerning Germany’s trouble, the future markets tumble lower with an immediate drop of ten S&P handles. If Germany cannot aid Europe in growing out of the debt mess, Europe has no hope. The U.S. markets open and immediately sell off due to worries about Obama’s policies. Gun sales explode higher; SWHC and RGR surge higher since citizens worry about new gun legislation. Coal stocks are bludgeoned since Obama dislikes the coal industry, the ‘war on coal’, and will now be free to further regulate and hurt this vital industry. Hospital stocks jump since Obamacare will now remain the law of the land but medical device makers drop due to higher taxes and fees coming. Defense stocks sell off since Obama will be against military spending. Dividend stocks sell off since far higher capital gains rates are coming so stocks should be sold from now thru the end of the year to receive lower tax rates on gains. The Draghi comments are hurting the markets but it is clear that a large part of the selling is directly due to the president’s reelection. The broad indexes tumble lower with the Dow down 369 points at the low when the European markets close before lunchtime. Keystone’s SPX 30-minute chart shows the 8 MA stabbing down thru the 34 MA indicating bearish markets for the hours and days ahead. The news gets worse. AAPL is now down over 20% off its top which indicates a bear market for this once high-flyer. Greece violence escalates ahead of the austerity vote. Over 50,000 demonstrators are on the streets of Greece throwing firebombs and the police respond with tear gas and water cannons to disperse the crowds. The video of the Greece riots further places trader’s on edge. Both Moody’s and Fitch rating agencies say that the fiscal cliff must be resolved quickly, otherwise, downgrades of U.S. debt will occur. This dire warning brings back memories of July 2011 right before the August waterfall market crash. President Obama’s first day after his reelection results in a massive sell off on Wall Street with stocks losing billions of dollars of value. Serious technical damage occurs as markets experience the largest drop in a year. The 10-year yield drops to 1.63%. The SPX falls under 1400 and is down 34 points, a huge 2.4%, to 1395. The SPX bounces from the 10-month MA at 1388. The Dow Industrials plummet 313 points, -2.4%, to 12933, losing the 13K level. The Nasdaq drops 75 points, -2.5%, to 2937, losing the 3K level. The RUT is down 21 points, -2.6%, to 805. Note that the small caps and tech are down more than the broad market, a bearish signal moving forward. The people spoke at the voting booth and now the markets will speak. Of great concern is States such as California that voted to keep the party going but in the months ahead will approach the American people to bailout their fun and frolic, just as Europe is being asked to bailout Greece’s irresponsibility.
On 11/8/12, Thursday, Japan’s machinery orders declined sending the Nikkei to a 3-month low. The 18th Party Congress begins in China where President Xi Jinping and Premier Li Keqiang will be named as the new China leaders and the ten-year transition period will continue. Greece votes to approve further austerity measures including a cut in wages and pensions. Juncker (Eurogroup President) says Greece has no choice but to accept austerity. Germany 10-year yield drops from 1.50% to 1.38% in only a few days time while Spain and Italy bond yields move higher; money is seeking perceived safety. The euro remains under the 1.28 level. The BOE decides to stop bond purchases since it appears that quantitative easing is not effective and it will actually cause more serious problems down the road. The ECB leaves rates unchanged so the euro remains flat. The U.S. markets open and financials catch a bid due to encouraging JPM news but the broad indexes start dropping and deteriorate all day long with the SPX dropping thru its 10-month MA, then 150-day MA and in the final minutes of trading, the 200-day MA. Keystone’s SPX 150-Day MA Slope Indicator signals a Cyclical Bear Market ahead in agreement with Keystone’s UPS 20 and 50-Week MA Indicator that triggered days ago signaling a Cyclical Bear Market moving forward. MCD lowers guidance moving forward breaking a long multi-month uptrend and drops 2%. AAPL tumbles lower dragging the Nasdaq lower. Serious technical damage is occurring in the markets with key levels giving way. The SPX finishes down 17 points, -1.2% to 1378. The Dow Industrials are down 121 points, -0.9%, to 12611. The Nasdaq is down 42 points, -1.4%, to 2896. The RUT is down 11 points, -1.4%, to 794, losing the psychological 800 level. Note how tech and small caps continue to lead lower which is very bearish for markets. After the close, DIS disappoints with earnings so Pluto promptly takes the pipe. Disney is a Dow component so this will hurt the Dirty Thirty tomorrow. Of greater interest is that JWN disappoints with earnings and is beaten severely. Nordstrom lowering guidance means the wealthy are no longer spending which is a negative indicator for the global economy. Ron Paul, one of the republicans that ran for the presidential nomination in the primaries, and well-known libertarian, says the U.S. already went off the fiscal cliff and the country is already broke. Finally, a voice of reason in all the madness.
On 11/9/12, Friday, France business confidence drops. The Troika report and vote on providing funds to Greece next week appears to be delayed. The euro is 1.2742 continuing to weaken on Greece upheaval, Spain refusing to ask for a bailout and lackluster economic data. The U.S. 10-year yield places a low at 1.57% and then recovers back above 1.60%. The markets drop after the opening bell but the Consumer Sentiment data is at a five-year high which pushes the broad indexes higher. At least folks will be happy when they are careening off the fiscal cliff. Speaker Boehner, on the republican side, holds a press conference stating the same ideas about resolving the fiscal cliff that were said before the election. Dueling press conferences occur with President Obama repeating the same positions as before the election as well, and then releasing a statement afterwards to clarify that the administration wants to put the screws to people making over 250K per year (the people that create jobs), so there is no mistake on interpretation. In other words, after the presidential elections, nothing has changed, all the gridlock and bipartisanship in Washington, D.C., remains, perhaps only worse now. Traders wasted no time in selling the markets; the SPX dropped ten points as President Obama spoke. In the three days following the president’s re-election, the broad markets have lost over -4% and 100 billion in market cap. Coal companies and numerous large and small companies that held on until the election have now given up issuing mass layoff notices due to the president’s reelection. The SPX moves back up thru the 10-month, 150-day and 200-day MA critical moving averages today only to close back underneath which is a very bearish signal. For the week, the SPX is down -2.4%, the Dow Industrials are down -2.1%, the Nasdaq is down -2.6% and the RUT is down -2.4%. Tech and small caps continue to lead the broad indexes lower which is a bearish signal. The major indexes have their worse week of trading in the last half year. Volatility continues to move higher. Keystone’s Inflation-Deflation Indicator signals that the country is in Disinflation on the verge of falling into Deflation. General Patraeus resigns due to an extramarital affair which is odd timing since he was scheduled to testify on the Bengazi scandal next week. A predator drone was also shot at by the Iranians which should be perceived as an act of war. Both these events occurred before the election but the news was withheld by the administration until after the elections. This behavior encourages stock traders to be more mistrustful moving forward.
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On 11/12/12, Monday, Veteran’s Day Observed, stock market is open but the bond market is closed. Troika needs to supply a report to help support a decision on further Greece aid but it looks like another deadline will be pushed forward (the decision has been repeatedly delayed from August; Europe does one thing very well—can kicking).
On 11/13/12, Tuesday, NFIB Small Biz Optimism Index. New moon. Solar eclipse. HD. CSCO.
On 11/14/12, Wednesday, China will officially select the new President Xi Jinping and new Premier Li Keqiang, Xi and Li, as the week-long 18th Party Congress convention wraps up this week, and the ten-year transition of power continues. PPI and Retail Sales. Business Inventories. FOMC Minutes. Bradley turn date.
On 11/15/12, Thursday, CPI. Empire State and Philly Fed Surveys. TGT. WMT.
On 11/16/12, Friday, OpEx. TIC data. Industrial Production.
Europe continues to dictate global market direction with several moving parts;
· The Spain bailout request must occur before the ECB OMT bond-buying program can occur. Spain must formally request the bailout since it shows a willingness to give up some sovereignty and accept oversight and conditionality. The Spaniards are proud folks so they keep trying to hang on without requesting a bailout. Italy tries to convince Spain to request the bailout since the bond-buying would help Italy’s debt mess. Rajoy likely has no plans to ask for a bailout anytime soon since the Catalonia regional elections are 11/25/12, and it appears Spain will not request a bailout until December or later. The Spain 10-year yield is approaching 6% but do not look for a Spain bailout unless the 6.25-6.50% and higher yields occur. The euro weakens (equity markets weaken) with no bailout but will launch higher with a bailout request.
· Troika is scheduled to make a decision on Greece’s debt mess on 11/12/12 but do not hold your breath. The schedule has changed from August to September to October and now to November and will likely move to December. The euro will weaken as the Greece mess continues but the euro will jump higher if a solution occurs, which would send equity markets higher as well. Greece will likely stay in the euro until the Merkel election occurs in Germany in the Fall 2013.
· Cyprus needs aid. Perhaps the European leaders are working on a package approach where a Spain, Greece and Cyprus aid package will be announce all at once in December.
· Italy, Ireland and other Euro nation’s ongoing individual debt drama’s.
· Fiscal Union and Banking Union. Merkel is pushing the fiscal union. The banking union is to start up January 2013 but will not be fully functional until January 2014. The schedules and dates continue to slip forward.
· The Draghi put supporting the markets is the announcement of the OMT program on 9/6/12 at SPX 1403. The SPX 1403 failed so traders have lost confidence in waiting for a Spain bailout and are growing tired of the continual European can-kicking with no solutions.
· ECB Rate Decision and Press Conference Thursday, 12/6/12. Europe must lower the value of the euro to increase growth thru manufacturing and exports. If the ECB cuts, the euro will drop and bring down equities. If the ECB stands pat the euro will move sideways or up which will help support equities markets
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On 1/1/13, Tuesday, ESM is officially open but will not be fully operational.
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. On 9/13/12, Bernanke says the Fed does not have tools to handle the fiscal cliff.
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In February or March, new China President Xi Jinping and Premier Li Keqiang take over complete control and the ten-year transition of power is finished. China now sets inflation and budget targets moving forward.
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