On Friday, 1/4/13, Abe says it is the duty of the BOJ to achieve the 2% inflation goal and beat deflation. Dollar/yen hits 88.18 at two and one-half year highs. China HSBC Services PMI surprisingly drops. China is touting the “China is the manufacturer of the world” line so that hints that the move to a domestic-led economy in China is likely occurring at a far slower rate than hoped. The euro is down to 1.30. The Monthly Jobs Report announces 155K jobs, with a slight revision to last month’s 146K up to 161K, and a tick up in the unemployment rate to 7.8%. Average hourly earnings increased 0.3% which is an encouraging two-month trend that may be developing. However, the 155K number remains shameful, since it does not even handle the new workers entering the workforce let alone the 25 million people in the U.S. that are either unemployed or underemployed struggling each day..The markets move sideways for much of the day. The standard Friday afternoon buoyancy occurs as short traders pare back positions into the weekend. The financials explode higher in a bull feeding frenzy today receiving over a one-half percent rally in the final hour of trading. Traders expect great things from financial earnings announcements in January. The 10-year yield is 1.91% after spiking up to 1.97% intraday. The euro recovers to 1.3069. Gold drops to 1626 but recovers thirty bucks to 1658 after the precious metals receive a spank down from the FOMC Minutes. At the close, the SPX squeezes out a five-year closing high at 1466.47. The SPX is not yet above two September-October intraday highs in the 1470’s. The VIX plummets under 14 in a record-setting near 40% drop this week, at levels not seen since the September market top. The bulls came to play this week, aided by a new year with new money coming into the market, as well as the fiscal cliff resolution. For the week, the SPX closes up 4.6%, the Dow Industrials are up 3.4%, the Nasdaq up 4.8% and the RUT up a large 5.7%. Tech and small caps led which is a bullish signal but tech faded late week. The Dow lagging shows that traders want to believe in an up year for 2013 and are chasing into small caps. The headline for the weekend newspapers, cable shows and blogs is written; “SPX Closes at 5-Year High.”
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On Sunday, 1/6/13, Senator McConnell takes taxes off the table and says spending is the focus ahead of the debt ceiling deadline. The president disagrees indicating that further taxes are on the table. The democrats and republicans appear more polarized than during the fiscal cliff circus.
On Monday, 1/7/13, the overnight session is uneventful. Global markets are flat to negative. TM cuts auto sales forecasts for China and says that it is unlikely any new plants are needed before 2016. The Basel regulators relax the liquidity requirements on banks so the European banks are up strongly. The first full week of trading in 2013 begins. The broad indexes are weak out of the gate and stumble sideways all day with a downward bias. The session is a respite from the hoopla last week. Keystone’s 30-minute chart shows the 8 MA stabbing down thru the 34 MA signaling bearish markets ahead. The SPX closes at 1461 sitting on the key 1460-1461 support level. After the bell, YUM, a key proxy for China mainly due to chicken restaurants, lowered guidance moving forward due to weak sales and the stock is hit hard in the AH’s. News outlets report that the debt ceiling will be hit in mid-February.
On Tuesday, 1/8/13, Japan says the Forex reserves may be used to buy ESM bonds in the future. UBS, a bank involved in the Libor rate-fixing scandal, announces plans to can 10K workers over the coming years. The Eurozone unemployment rate hits 11.8%, the highest reading since data-recording started, with youth unemployment tat 24%. The NFIB Small Biz Optimism Index remains weak. MON earnings blow the cover off the ball which encourages the commodities sector. The broad indexes are flat with a downward bias due to a rumor of a France downgrade. After the bell, AA kicks off earnings season on a positive note meeting on the bottom line and beating on the top line which improves the tone of the markets.
On Wednesday, 1/9/13, markets remain in a holding pattern awaiting the ECB rate decision tomorrow. At 11 AM, Keystone’s SPX 30-minute chart shows the 8 MA crossing above the 34 MA signaling bullish markets for the hours and days ahead.
On Thursday, 1/10/13, China’s trade data surprises to the upside (since the European and American economies are weak) with exports hitting a 7-month high. Copper, commodities, gold and oil explode higher on the news, however, the orders appear to be short-term and not sustainable. At 5:30 AM EST, the Spain 10-year yield falls under 5% not seen since March 2012, almost one year ago. The Draghi put, the OMT back-stop, is working. Traders believe that the ECB will support the markets repeating the mantra, ‘don’t fight the ECB’, obviously adapted from the ‘don’t fight the Fed’ refrain. The euro moves above 1.31. Juncker says “the worst is probably over in the Euro debt crisis.” The ECB decides to keep rates on hold with all members voting unanimously to not cut, a change from the last meeting. Draghi does not mention any plans for easing in the press conference so the euro catapults higher up and over 1.32 and an up euro means up equity markets. Draghi has the magic touch with the markets; he speaks and markets move higher. Draghi is sending a message that he is likely not considering a rate cut until summer time at the earliest, so the euro will remain buoyant, and equities will remain buoyant. Of course if the European recessions and depressions worsen, his tune will change quickly. Warren Buffett says “the banks will not get the country in trouble, I guarantee it.” Statements like this are interesting in historical perspective. Irving Fisher, the leading U.S. economist in 1929 proclaimed that the stock market has reached a ‘permanently high plateau.” The Great Crash occurred a month later. Time will tell, Mr. Buffett. MS announces several thousand layoffs. The BATS Exchange says a software problem has resulted in customers losing 400K over the last four years. BATS blames complex government regulations. The computer glitches are common place now and a potential major Flash Crash is on the table for 2013, simply more reasons for Joe Sixpack to avoid the markets. The markets are flat to start the day but take off upwards after the European close at 11:30 AM. The SPX closes at a five-year high at the strong 1472 resistance. The small caps and tech lagged the broad markets. The president nominates Jack Lew as the replacement for Secretary Geithner. After the close, Moody’s downgrades Cyprus citing default risk. AXP pre-releases earnings which meet the bottom line but miss slightly on the top line revenue. AXP announces 5.6K layoffs which will keep Wall Street happy, but, unfortunately, thousands of employees in the banking industry receive pink slips today.
On Friday, 1/11/13, Japan’s Abe announces a large stimulus package which weakens the yen and drives the dollar/yen higher. Commodities, copper and oil, however, move lower. Trader’s are abuzz about the strong inflows into ETF’s and funds, however, it is the start of the year where that would be expected. American Airlines say 16.5K applicants applied for 450 job openings; that’s about 40 people fighting for each job. Do you think the 25 million people in the U.S. that are unemployed and underemployed are felling pain? Of course they are, and this will likely create structural economic problems for the U.S. moving forward. WFC earnings beat on the bottom and top lines but not a blow-out beat which is what Wall Street wants to see. WFC stock moves lower and does not supply the bullish happiness that long traders hoped for this morning. The banks in general take on a negative tone as does the markets. BA (Dow component) is down pre-market due to the continued negative 787 news. The holiday PC sales are weak ending the decade long positive upswing year after year. The shift from desktops to mobile computing (Smartphones, tablets and laptops) is clearly taking hold. The broad indexes recover the downside today, rallying from 11:30 AM forward just like yesterday. The SPX closes stone-cold flat on the day remaining at the strong 1472 S/R. For the week, the broad markets are up about one-half percent. The tech sector led the upside although AAPL is languishing sideways. The small caps lagged the major indexes all week hinting that the big upside last week in small caps was more due to short-covering rallies on speculative stocks. After the bell, Senate democrats send a letter to the president urging him to take any steps necessary to avoid the debt ceiling limit regardless of what Congress does, which includes considering invoking the 14th Amendment, or minting a trillion dollar platinum coin.
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On Monday, 1/14/13, lots of Fed speak is on tap this week. Williams and Lockhart today and then Chairman Bernanke speaks and takes questions after the markets close. PPG earnings-chemicals.
On Tuesday, 1/15/13, PPI and Retail Sales. LEN earnings-housing.
On Wednesday, 1/16/13, CPI. Oil Inventories. JPM and GS earnings-financials.
On Thursday, 1/17/13, Housing Starts. Philly Fed. BAC and C earnings-financials. INTC earnings-tech.
On Friday, 1/18/13, China GDP, Retial Sales, Housing and Production data. OpEx. Consumer Sentiment. Three-day holiday weekend begins. GE earnings-bellwether.
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On Sunday, 1/20/13, BOJ provides a plan. Germany Lower Saxony elections.
On Monday, 1/21/13, U.S. Markets are Closed in Observance of Dr. Martin Luther King Day. Presidential Inauguration. The president will have the debt ceiling, sequester and continuing resolution hanging over his head as he assumes the oath of office.
On Wednesday, 1/23/13, AAPL earnings.
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On Tuesday, 2/12/13, President Obama’s State of the Union address.
In February, the 16.4 trillion 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.
On Friday, 3/1/13, the Sequestration hits with one trillion in automatic spending cuts for government.
On Wednesday, 3/27/13, the Continuing Resolution is required to fund the government.
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 earnest.
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.
just a simple thought .... where the arkets will start to crumble?
ReplyDeletehttp://money.cnn.com/data/fear-and-greed/
at 90? at 92? at 95 ? .. not fear -greed index is at 84 :)... cpc at 0.72, vix lowering and lowering (probably heading to 13's or lower) ...
KS, you were right about the fact that Grandma and Grandpa are busting into stocks with their retirement money :)
but ... I don't want to wreck the party .. the stocks will continue to rise on..and on...and on... :)
V.
Interesting stuff. The put and call options are key, folks are not buying protection, even with it cheap, since they are 100% convinced that markets will not, or perhaps never, go down again. Usually, this type of thing is rectified very sharply and quickly, in a day or two's time.
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