On Friday, 2/1/13, the China PMI is weaker than expected but shows a hair of expansion remaining in place. The HSBC PMI number was better than expected so global markets float upwards on copper buoyancy. Traders continue to follow the good news and toss the bad news aside. Spain lifted the short-selling ban on banks and they are sold off hard again today. The Spain markets dump 5% this week as European leaders tell everyone things are fine. The euro/dollar explodes higher to 1.3675 and the dollar/yen up to 92.2, phenomenal currency moves overnight. The higher euro sends equity futures higher. The U.S. and Japan are in a race to debase while Europe stands by watching. Europe needs growth more than the other areas and the higher euro will only serve to hurt the manufacturers and exporters further. Draghi may have to take action next week. Eurozone unemployment rate is 11.7% remaining stubbornly high. XOM earnings beat but MRK earnings disappoint. The Monthly Jobs Report disappoints with 157K jobs and a tick higher rate at 7.9%. The November and December numbers are revised upwards to over 200K. Traders wanted to see 200K today so instead the focus is on the higher revisions causing traders to buy the market. In addition, the tick higher in the rate, from 7.8% last month to 7.9% now, farther away from the Fed’s self-imposed target of 6.5%, means the money printing spigots will be turned on higher, so the bulls begin a wild upside orgy party knowing there is free and easy money as far as the eye can see, fundamentals be d*mned. The average hourly work week is flat and average hourly earnings lackluster so employers have no impetus to hire; they are getting by fine without needing any additional employees. The structural unemployment problem in the U.S. grows; 25 million people are either out of work or underemployed. The futures catapult higher on the weak news, the S&P’s up 10 and Dow Industrials up over 100 points. The markets continue to ignore bad news and focus only on positive news. Consumer Sentiment and ISM Mfg Index is better than expected which provides further upward momo after the opening bell. Keystone’s SPX 30-minute chart 8 and 34 MA cross indicator shows the 8 piercing up thru the 34 MA to signal bullish markets for the hours and days ahead. The SPX punches out a new 2013 intraday high at 1514.41 and closing high at 1513.17. The Dow Industrials finished over 14K for the first time since 2007 making the headline writer’s job easy this weekend. The all-time Dow high is 14164.53 in October 2007 so the bulls only need about 150 more points. The euro moved above 1.37 before pulling back. Higher euro = higher equity markets. The telecom sector is strong today as folks chase dividend stocks continuing to pump the dividend stock bubble. Copper and commodities move higher over the last three weeks, taking the broad indexes higher, as the global central banker’s easy money policies create new asset bubbles. The utilities sector is lagging today. During trading hours, video from Egypt shows thousands of demonstrators rushing Morsi’s palace. Fire bombs are thrown over the palace gates. A suicide bomber attacks the Turkey Embassy. Turkey is key due to the pipelines that move oil to and from the Middle East and Europe. Brent oil catapults to a 3-month high at 116. WTIC oil moves higher to tag 98 before pulling back. Gasoline prices at the pump will increase due to higher moves in oil recently, many localities already commenting on nickel and more increases appearing overnight. It is remarkable to see the markets turn a blind eye to geopolitical events, not pricing in any worry or fear, sans the oil markets. For the week, the SPX is up 0.7%, the Dow Industrials are up 0.8%, the Nasdaq is up 0.9% and RUT up 0.7%. Tech and small caps are moving coincidentally with the broad indexes not showing leadership that should be expected for strongly bullish markets. The sequestration hits in 26 days.
On Saturday, 2/2/13, the Baron’s headline page is uber bullish in keeping with other newspaper headlines all week long; “Stock Alert! Get Ready for a Record on the Dow.” Such euphoric headlines typically indicate topping markets.
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On Monday, 2/4/13, the negative news on alleged Spain corruption dominates the wires. Rajoy and others may have been involved in corruption and bribery although Rajoy vehemently refuses these allegations. Nonetheless, traders are losing confidence in Spain as the market drops 2% today, now down over 7% in only the last few days. The negativity is now affecting Italy which is dropping as well as Germany. The European bond yields are jumping higher which shakes loose the memories of all the European debt crisis drama months ago before things had calmed. The euro falls under 1.36. On Friday the euro ran towards 1.38 and Forex traders proclaimed the road to 1.40+ is here. WMT is downgraded. The futures fall like a stone about an hour before the open and the SPX drops ten points to 1503 at the opening bell. Merkel and Rajoy conduct a press conference at 10 AM EST. Merkel has a painful look on her face as if she is at the dentist’s office. The corruption scandal may force Rajoy to resign and a snap election may throw Europe into chaos. Markets are nervous. The markets drop after the opening bell and the SPX loses 1500. Keystone’s SPX 30-minute chart 8 and 34 MA cross indicator shows the 8 stabbing down through the 34 MA to signal bearish markets for the hours and days ahead. At the close, the SPX ends at 1495 with a bearish engulfing candlestick as compared to Friday’s action. The Dow Industrials log their first triple digit down day for 2013. For today, the SPX is down 1.1%, the Dow lost 0.9%, the Nasdaq was down 1.5% and the RUT was down 1.3% losing the 900 level. Tech and small caps lead lower. YUM earnings meet expectations but the guidance for 2013 is terrible. YUM drops over 5% in AH’s. CAT and YUM, the two key China proxies, have laid eggs, but traders continue to view the markets through rose-colored glasses. The Department of Justice sues S&P ratings agency over the botched ratings on mortgage-backed securities leading into the real estate bubble collapse. S&P says they will fight the charges and they did nothing wrong. At 8 PM EST, the euro loses 1.35 and WTIC oil loses the 96 level. The moves are short-lived.
On Tuesday, 2/5/13, German machinery orders rebound. The Italy 10-year note yield hits 4.77% and the Spain hits 5.5%, blowing out higher. The European debt crisis is front and center again. Berlusconi is reemerging in Italy. Draghi is mired in Italy’s banking scandal. Rajoy is now involved in a corruptions scandal. Japan’s Shirakawa will step down from the BOJ on 3/19/13 and will be replaced with a dovish member. The yen weakens on the news since this encourages more debasement and the dollar/yen prints another new high tagging 93. IBM will offer lower priced services moving forward. A theme is developing since AAPL plans to offer low-end phones. Obviously the high mark-up companies need to find new sources of revenue, and are moving down the ladder, which offer lower margins. TM provides encouraging guidance but says it will not build a new vehicle production plant for years to come. The Asian markets sell off to catch up to the down day in the States but the European markets move flat. The U.S. S&P futures are up six. DELL announces the largest leveraged buyout since the financial crisis occurred. ACI says coal will be flat for years, not a ringing endorsement of the global economy. The markets leap higher at the open and remain lofty all day long pulling back into the close. At noon time, Keystone’s SPX 30-minute chart 8 and 34 MA cross indicator shows the 8 piercing up through the 34 MA to signal bullish markets for the hours and days ahead. The markets are erratic and unstable. SPX finishes at 1508 after printing a new intraday high for the year at 1514.96.
On Wednesday, 2/6/13, the Nikkei explodes higher overnight up 4% towards 11500 as the dollar/yen flies towards 94. Fitch places Netherlands on watch for a potential downgrade. Netherlands, Finland and Germany are the safer havens in Europe, perhaps not so much now. CMI, a diesel engine manufacturer, says the outlook forward is cloudy. This is in keeping with CAT’s lack of helpful guidance; the large machinery industry is moving into a slump verifying a sick global economy. The euro loses the 200-week MA at 1.3530 and briefly falls through 1.35. Traders are tripping over each other to buy platinum and palladium since continuing labor problems at mines create supply constraints while the perception of strong automobile sales creates higher demand. The post office (USPS) will halt Saturday delivery starting in August for this bloated bureaucracy that is bleeding money. Boise Cascade BCC IPO begins trading and jumps higher as traders chase lumber believing in the housing recovery. The markets idle all day long awaiting the ECB rate decision tomorrow morning. The markets end flat on the day. The SPX is at 1512. After the bell, V beats on earnings.
On Thursday, 2/7/13, Japan machinery orders are up with the weaker yen spurring growth. Japan says they are simply trying to create some inflation by weakening the yen but they have launched a move that has momo and a mind of its own; the dollar/yen moves higher (yen weaker despite the Japan comments) just under 94. India growth is revised downwards. Asian stocks are weak as China moves towards the Lunar New Year week long celebrations. The Year of the Snake is on tap, interestingly, the snake occurred in 1929. The Spain 10-year yield sits at 5.5%. The Monte Paschi CEO says there is ‘no run on the bank’s deposits’. Always be skeptical with these statements. Draghi is tainted by the improprieties at this bank. Incoming BOE governor Mark Carney (from Canada) provides testimony. WTIC oil is at 97. The ECB Rate Decision and Press Conference results in no rate cut as expected, however, Draghi wants to be ‘accommodative’ moving forward. The euro drops like a stone through 1.35. Surprisingly, the U.S. futures remain flat. U.S. productivity drops 2% in Q4 not an encouraging sign for those looking for work. At the opening bell, the markets drop and then moderate sideways throughout the day. At 10:30 AM, Keystone’s SPX 30-minute chart 8 and 34 MA cross indicator shows the 8 stabbing down through the 34 MA to signal bearish markets for the hours and days ahead. The euro loses 1.34 briefly. WTIC oil is dropping but Brent oil is up indicating turmoil in the Middle East. Consumer Credit data shows debt increasing in student loans and car loans. Credit card debt is down but moving flat overall and likely unable to fuel a robust recovery. SPX closes at 1509. After the bell, LKND earnings beat handily and the stock jumps 10%. Data on the broad markets show that the insiders are dumping stock at a rate of 9 to 1 as compared to the insider buying.
On Friday, 2/8/13, China CPI shows inflation pulling back and the trade data provides upbeat numbers. Copper and commodities push higher. The week-long Chinese New Year’s celebration for the Year of the Snake begins. The Nikkei ends a 12-week winning streak, the longest streak in over fifty years, all due to the weakening yen. Japan’s Aso says the yen weakened more than intended in the short term but he is likely playing politics ahead of the G20 meetings. Dollar/yen hovers at 92.50 after hitting 94. Gold remains flat at 1670. Brent oil is 117.61 moving higher indicating turmoil in the Middle East. The Syria situation is out of control and the refugee’s may collapse neighboring countries, hence, Brent climbs and the WTIC to Brent spread increases. Thyssenkrupp steel company announces 2000 job cuts in Europe. Peugot will likely need a bailout in France showing that automobile sales are weak. Obviously, growth is weak if steel is not in demand. Draghi “warns against complacency in the Eurozone crisis.” A snow blizzard named Nemo is targeting the East Coast; airline flights are cancelled ahead of time and preparations are underway. GNRC jumps in price as folks buy generators. The retailers will lose sales overall as folks plan to stay indoors for a few days. MCD, a Dow component, reports weak sales. Trade data is better than expected and hints that the -0.1% GDP would be revised up to about +0.7%. The futures gain upside into the open as the bad news is ignored and good news embraced. The opening bell rings and the broad indexes leap higher, then move flat the remainder of the day. At 10:00 AM, Keystone’s SPX 30-minute chart 8 and 34 MA cross indicator shows the 8 piercing up through the 34 MA to signal bullish markets for the hours and days ahead. Crude oil drops 2% this week to settle at 95.72 but Brent oil closes at a 9-month high at 118.90, and pierced through 119 today. The WTIC/Brent spread is a historic wide 23.18, representing a weakening global economy attempting to bring oil lower, but severe turmoil in the Middle East that is sending Brent oil higher. Gold closes at 1667 in very lackluster trading this year. Interestingly, the 10-year yield is at 1.95% dropping another tick late day showing that money is staying firmly in notes and bonds, despite the markets buoyancy today. The euro drops through 1.34 but the equities markets remain elevated, one of them is wrong. The trading volume is extremely thin as traders sneak out the back door to beat the snow storm. The SPX prints a new intraday high for 2013 at 1518.31 and a new closing high at 1517.93. The Nasdaq prints a new twelve-year high, going back to late 2000. For the week, the SPX finishes up 0.3% (up six weeks in a row—a down week has not occurred yet this year), the Dow Industrials are down a smidge on the week to 13993, the Nasdaq is up 0.5% to 3194 continuing on a six-week winning streak, and the RUT is up 0.3% to 914 also on a six-week winning streak. The blue chips lagged this week. Tech and small caps were leading much more strongly to the upside, which is a bullish indication, in early January, but are now moving more coincidentally with the broader markets. After the close, noted cycle follower Peter Eliades says today, 2/8/13, marks a significant market top, like October 2007. When asked what he would name the current market rally, Peter comically replied, “the bitter end.” In the evening, under the cover of darkness, GOOG’s chairman Schmidt plans to sell over $2.5 billion stock (3.2 million shares), one of the many insiders throwing their stock overboard during the last two months. Watch Google on Monday. (Type 'GOOG' into the search box above to bring up Keystone's chart from a couple days ago identifying the M Top in Google).
On Saturday, 2/9/13, snowstorm Nemo hits the East Coast. New York and New England declare states of emergency. About 500,000 folks have lost power as between two and three feet of snow fell in Connecticut, Boston, and the eastern seaboard. New moon this evening and Lunar New Year. The sequestration hits in 19 days.
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On Monday, 2/11/13, no economic data. MAS earnings-a gauge on housing.
On Tuesday, 2/12/13, 3-Year Note Auction. President Obama’s State of the Union address. CLF earnings, also KORS, RAX, KO, GT.
On Wednesday, 2/13/13, Ash Wednesday. Retail Sales. Business Inventories. 10-Year Note Auction. CSCO earnings, also DE, MET, Z.
On Thursday, 2/14/13, Valentine’s Day. G20 Conference and three-days of meetings begin. 30-Year Bond Auction. APA earnings, also BRCD, GM, PEP.
On Friday, 2/15/13, Empire State Mfg Survey. TIC data. Industrial Production. Consumer Sentiment. Three-day weekend ahead. CPB earnings.
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On Sunday, 2/17/13, Cyprus elections.
On Monday, 2/18/13, U.S. Markets are Closed in Observance of President’s Day.
On Tuesday, 2/19/13, U.S. Markets Open for Trading.
On Wednesday, 2/20/13, Housing Starts. PPI. FOMC Minutes.
On Thursday, 2/21/13, CPI. Existing Home Sales. Philly Fed. Leading Indicators.
On Friday, 2/22/13, …
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On Sunday, 2/24/13, Italy’s two-day national election begins.
On Monday, 2/25/13, Chicago Fed and Dallas Fed Mfg data. The results of the Italy election are expected. Full moon.
On Tuesday, 2/26/13, New Home Sales. Consumer Confidence. Chairman Bernanke speaks. 5-Year Note Auction.
On Wednesday, 2/27/13, Durable Goods. Chairman Bernanke speaks. 7-Year Note Auction.
On Thursday, 2/28/13, GDP. Chicago PMI. EOM.
On Friday, 3/1/13, PMI. Personal Income and Outlays. Consumer Sentiment. ISM. Construction Spending. The Sequestration hits with one trillion in automatic spending cuts for government. An 85 billion hit occurs immediately which should cut 0.7% off the GDP.
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Moving into 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. The GDP projections are of particular interest, 2012 grew at an average 7.8% rate.
On Wednesday, 3/27/13, the Continuing Resolution (CR) is required to fund the government.
In March and April, the BOJ head’s will be replaced so stronger QE will continue. Perhaps a pull-back and low in the Nikkei in February and March may provide an attractive entry for a long trade once the money-printing begins (weaker yen) in earnest.
On Sunday, 5/19/13, the 16.4 trillion Debt Ceiling hits.
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.
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