On Friday, 12/21/12, Quadruple Witching Opex. The Mayan calendar did not foretell the end of the world. Overnight, global markets are weak. Europe opens to the downside as the Plan B vote failure ripples thru the markets. The S&P futures are down over twenty handles. The smell of jet fuel proved too enticing for the House and Senate as the rats ran from the sinking ship to the airport to begin luxurious vacations. The political leaders dropped the people’s business like a hot potato and instead prefer to sip eggnog in their slippers. The U.S. markets open and the broad indexes immediately plummet on the failed Plan B vote and the realization that a fiscal cliff solution is no longer guaranteed by the end of the year. The markets, however, continue to provide the benefit of the doubt since the SPX fell from 1444 to 1422, then bounced and maintained a sideways range thru 1422-1433 all day long, a somewhat tame reaction all things considered. The euro drops under 1.32. The retail and financial sectors are weak. At 10 AM, Speaker Boehner says the president and Leader Reid must now figure a path forward. Consumer Sentiment is weaker than expected. President Obama speaks in the afternoon and says a ‘limited deal’ is possible in the remaining ten days but it sounds like it will be a watered down deal, and also that perhaps several mini-deals will occur with this fiscal cliff and debt ceiling drama for the weeks and months ahead. The markets will not like this path forward. The president smells the jet fuel and does not take questions, running from the podium to the airport to begin his fun and frolic in the Hawaiian sun, while the country hangs in the balance, and the 25 million under and unemployed people in the country continue to watch their lives and families fall apart each day. The Egypt voting is ramping up for the weekend again. Morsi continues to ramrod the Muslim Brotherhood into power. The street riots are growing more intense and violent perhaps leading to civil war, but Brent oil stays under 110. For the week, the Dow Industrials gained one-half percent, the SPX gained one percent, the Nasdaq gained 1.7% and the RUT gained 3%. Small caps and tech leading the broad markets is a bullish signal. Volume is light this time of year although OpEx ushered in strong volume today. The president has raised everyone’s hopes for next week so he will need to deliver. Congress should be back on Thursday, so late next week may experience the same turmoil as this week.
On Saturday, 12/22/12, a major Bradley turn date for markets. The Egypt vote continues.
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On Monday, 12/24/12, Christmas Eve, U.S. markets close early. The markets drift sideways with a lower bias in light volume for this holiday-shortened session. Weak preliminary retail sales data is creating a negative vibe. The malls do not appear as busy as expected and holiday sales targets are dropping.
On Tuesday, 12/25/12, Christmas, U.S. markets are closed for the holiday.
On Wednesday, 12/26/12, U.S. markets reopen for trading. Happy Kwanzaa. The retail holiday sales data is weaker than expected, the weakest sales since 2008 as the crash was occurring. On-line sales were up only 8.4% no longer producing double-digit growth. The consumer is pulling back on spending due to higher taxes, unemployment and underemployment, negative fiscal cliff talk, Hurricane Sandy and the Connecticut mental illness tragedy. Interestingly, store traffic was strong but the buying was not, consumers were simply revisiting the scene of the crime (high credit card debt). News is released that President Obama and Leader Reid are working on a Plan C in Hawaii. Leader Boehner says he is “not bringing the House back until the Senate does something” and in relation to the fiscal cliff resolution, “how we get there, God only knows.” The markets meander lower all day in a sick malaise. After the bell, Secretary Geithner says the debt ceiling will be hit on Monday 12/31/12; more Kabuki Theatre.
On Thursday, 12/27/12, the markets leak lower after the open on weaker semiconductors and financials. Consumer Confidence is weaker than expected and increases the market selling. At 10 AM, Harry ‘Happy Talk’ and ‘the republicans are holding America hostage’ Reid says that “it looks like that is where we are headed.” (over the cliff) The markets sell off strongly on this news. The SPX loses the strong 1419 support. Keystone’s SPX 60-minute chart with 200 EMA indicates bearish markets ahead. Keystone’s SPX:VIX Ratio Indicator drops under 68 indicating severe selling ahead and a potential crash, however, the ratio recovers, finishing the day back above 68. The Dow Industrials drop under 13K. The VIX moves above 20. At 2:45 PM, news hits that the House will reconvene on Sunday at 6:30 PM EST. The SPX catapults from 1403 to 1412 and higher in a few minutes time. Congressman Scott Brown tweets that the president has provided a new offer but this news is quickly refuted by the Whitehouse. Nonetheless, the market low is comically dubbed the “Brown Bottom.” Senator McConnell speaks as the last few minutes of trading plays out in the session saying he is frustrated over the progress on the fiscal cliff. This dampens the mood. The SPX closes at 1418. The broad indexes end flat on the day recovering the earlier losses. Leader Reid talks blaming the republicans again. The Washington dysfunction is already hurting the economy and markets, simply look at the holiday sales numbers and Consumer Confidence for proof. As the evening moves along, McConnell says the “republicans will not write a blank check for what Senate democrats propose.” Leader Reid says “the talks between Obama and Boehner have broken down,” and “the republicans are obstinate.” As the dust settles, the president announces a meeting at the Whitehouse tomorrow at 3 PM.
On Friday, 12/28/12, futures deteriorate as traders and markets are becoming tired of the fiscal cliff theatrics. The broad indexes drop lower after the opening bell. Copper weakens but markets remain in a holding pattern until the 3 PM meeting at the Whitehouse. At 3 PM, the broad indexes start to collapse but the S&P rating agency releases news that they will not downgrade U.S. debt based on the fiscal cliff impasse. The stick-save bounces and stabilizes the markets but President Obama says there will not be a new offer proposed at the meeting. The markets immediately sell off. The president offers nothing new and pushes off responsibility to the Senate requesting that Leaders Reid and McConnell develop a plan. The broad indexes drop into the closing bell with the SPX closing at 1402 under where all the recent Fed and ECB quantitative easing programs were announced. Keystone’s SPX:VIX Ratio Indicator drops under 68 indicating a large triple digit down day for the Dow Industrials is on tap, which occurs today, and also that the broad indexes have fallen into a bear market pattern and the potential exists for a market crash in the coming days. After the bell, the e-mini S&P futures plummet about 25 handles punching out a low at 1383, lower than the 1391 low from a few days back. If the markets were to open now, the SPX would be down 40 handles and the Dow Industrials would lose well over 300 points. The fate of the markets is in the hands of Leaders Reid and McConnel this weekend. They need a package that can be approved Sunday evening, otherwise, the markets are going to sell off strongly come Monday morning. The SPX finishes down 16 points, -1.1%, to 1402. The Dow is down -1.2%, the Nasdaq off -0.9% and the RUT -0.63%. Tech and small caps did not lead the downside but for the week overall, tech did lead the markets lower. On a positive note, the dockworkers strike, which would have crippled the East and South U.S. Coasts, was averted for thirty days.
On Saturday, 12/29/12, France is overturning the ridiculous 75% tax rate on the wealthy but the damage is likely already done.
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On Sunday, 12/30/12, President Obama appears on Meet the Press Sunday political talk show to defend his fiscal cliff decisions. Leaders Reid and McConnell provide a plan that?………. a vote occurs in the evening? ……… the Asian markets and S&P futures show?……… the European markets are? …….
On Monday, 12/31/12, the fiscal cliff drama sets the tone with …… EOM. EOQ4. EOH2. EOY2012. Last Day of Trading for 2012. Dallas Fed Mfg Survey. Farm Prices.
On Tuesday, 1/1/13, U.S. markets are closed to for the New Years Day holiday. ESM is officially open but will not be fully operational.
On Wednesday, 1/2/13, 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 and 12/12/12, Bernanke says the Fed does not have tools to handle the fiscal cliff. First Day of Trading for 2013. PMI Manufacturing data. ISM Manufacturing Index. Construction Spending. FOMC Minutes.
On Thursday, 1/3/13, ADP Job Report. Jobless Claims. Oil Inventories.
On Friday, 1/4/13, Monthly Jobs Report. Factory Orders. ISM Non-Manufacturing Index. Natty Gas Inventories.
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On Monday, 1/21/13, Presidential Inauguration, Martin Luther King Day. The president does not want a fiscal cliff mess and fiasco hanging over him on this day, thus, this date serves as an absolute deadline for the fiscal cliff and debt ceiling resolution.
In February, the debt ceiling hits.
In February, Italy elections.
In February or March, the National People’s Congress convenes. 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. China will push to a domestic-led economy, private consumption, rather than an export-led economy, but a domestic economy will grow at a slower pace.
In March and April, the BOJ head’s will be replaced so strong QE will likely begin. Perhaps a low in the Nikkei in January or February may provide an attractive entry for a long trade once the money-printing begins (weaker yen).
In September, Merkel (Germany) seeks re-election and will not want to see Greece exit the euro before the election but will not care afterwards. Perhaps Greece and Germany will both exit the euro in the future.
How many hours of sleep do you get? :-)
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