On Friday, 2/22/13, China home prices continue to rise which may require further curbs to prevent the growing property inflation. The European Union says the Euro area economy will continue to shrink in 2013 with lower GDP numbers expected. Spain will miss their budget targets which occur over and over again. The euro moves sideways at the 1.32 level. Germany’s business confidence rises. The markets choose to latch onto the good news. The U.S. Midwest is pummeled with severe snowstorms that will create business weakness for several days. Missouri declares a State of Emergency. President Obama and Prime Minister Abe meet and agree that generating growth in the U.S. and Japan economies is the key priority. Futures are on the plus side as the Fed’s Bullard appears on business cable television. Bullard, typically a hawkish member, flaps dovish wings instead and says the Fed’s easy money will continue as far as the eye can see. The futures jump higher. Isn’t it obvious that the markets are simply a casino machine that jumps higher on easy money? As long as the Fed supplies the crack cocaine, markets move higher. Keystone’s 8/34 MA Cross Indicator shows the 8 MA moving back above the 34 MA at 2 PM indicating bullish markets for the hours and days ahead. A late day upward thrust occurs for the broad indexes with the SPX closing at 1516, back above the 20-day MA. The 10-year yield is 1.97%. Gold is 1580. Crude oil wrestles at 93 all day. The euro is 1.3192. For the week, the SPX finishes down a smidge ending the seven-week rally, the Dow Industrials close at exactly 14000 up only pennies for the week, the Nasdaq is down 1% and the RUT is down -0.8%. Tech and small caps are leading the broad indexes lower. Well after trading hours end, Moody’s rating agency cuts the U.K.’s triple A rating citing weak growth and mounting debt.
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On Saturday, 2/23/13, the ‘Citizen Tide’ protest sweeps through Spain with tens of thousands of people marching to protest austerity and corruption. The civil unrest across Europe continues.
On Sunday, 2/24/13, Italy’s two-day national election begins. Congress returns from vacation to address the Sequester only five days away. YUM, a key bellwether, announces lower growth in Indonesia continuing the theme of lower guidance across Asia. China Flash PMI is far weaker than expected (four-month low) at 50.4 but remains a hair in expansion territory. U.S. futures drop a couple S&P’s on the news and the euro remains under 1.32.
On Monday, 2/25/13, Japan’s Karudo is selected for the BOJ so the yen weakens and the dollar/yen reaches multi-month highs. The U.K. reaction to the Moody’s downgrade is muted. C lowers the EPS estimates for Italian banks but the banks move up in price. The Italy elections continue. Overnight, the euro recovers moving above 1.32, then above 1.3230, then above 1.33. Higher euro = higher equities. The S&P futures are up six at 6 AM EST recovering from the disappointing China PMI. Markets continue to ignore bad news. WTIC oil moves above 94. LOW earnings are in line with consensus. The broad indexes pop at the opening bell and the day is joyous as Italy’s Bersani is going to clearly win the election. A short time later, a huge surge is shown for Berlusconi which throws a monkey wrench into the elections. The Italy market was up about 4% today and reversed to move down about 6%, a powerful move. The equity markets sell off and fall steadily on the Berlusconi news into the closing bell, a dramatic reversal. The SPX was over 1525 and dropped to 1487, a 38-point intraday move. The Dow Industrials lost over 150 points in the last hour of trading, a pace of about three points per minute. The VIX, volatility index, catapults over 34% higher creating market mayhem. Keystone’s 8/34 MA Cross Indicator shows the 8 MA stabbing down through the 34 MA indicating bearish markets for the hours and days ahead. Likewise, Keystone’s 200 EMA Indicator shows the SPX falling through the 200 EMA on the 60-minute chart signaling bearish markets ahead. Keybot the Quant, Keystone’s trading algorithm was whipsawed today, once to the upside at today’s open, and then to the downside at SPX 1502. Keybot is short now from SPX 1502. The day ends with the SPX down 28 points, -1.8%, to 1488. The Dow Industrials are down 216 points, -1.6%, to 13784. The Nasdaq is down 46 points, -1.4%, to 3116. The RUT is down 20 points, -2.2%, to 896. The big story is the drop in the 10-year Treasury yield from over 2.00% today to 1.87%. WTIC oil drops well under 93. The euro is well under 1.31. The financial and retail sectors show significant weakness. MS, with large banking ties to Europe, falls 7% today, bringing back memories of the last Euro crisis. At 7 PM, the results of the Italy election show a close race and a split of government between Bersani and Berlusconi. The comedian Grillo receives a large block of the voting as well. Monti, the current guy in charge, who created the austerity and belt-tightening measures, came in fourth place with only his mother voting for him. People voted for party-time, not austerity-time. The Italy mess may result in a second vote that would create further market uncertainty and turmoil. European markets are hit hard. Despite the large market drop, the CPC put/call ratio is 1.15 showing that traders remain relatively complacent and there is no fear or panic whatsoever. Titan’s CEO Taylor says he would not buy a flailing France Goodyear tire plant since the French only work three hours per day and it would be impossible to make money. The French union boss replies, “That is the French way, Mr. Taylor.” Taylor called them all crazy and said do not count on his company getting involved. The workers take offense to Taylor’s comments and burn a mountain of tires in protest.
On Tuesday, 2/26/13, the Italy 10-year yield moves up over 4.80%. The 6% level will spell dire consequences for Italy and Europe. Berlusconi says, “the markets are crazy.” The Italian banks are collapsing, dropping from 5 to 8%. European stock markets are down from one to six percent. The Midwest is hit with 18 inches of snow and hurricane-force winds which will continue to hurt business across the U.S. heartland but the snow will help fight the ongoing drought conditions over the last couple years. HD and M earnings are in line. Chairman Bernanke testifies before the Senate and says the easy money policies will continue. Bernanke says the benefits of QE are more important than the excessive risk-taking that may occur. New Home Sales are stronger than expected jumping to the strongest numbers in years. Consumer Confidence is better than expected. The broad indexes bounce. Bernanke is unequivocal in defending QE and appears confident and self-assured. The markets feed off the positive vibe and the dead-cat bounce today runs higher into the closing bell with the SPX at 1497. The broad indexes recover one-half of yesterdays drop. The Dow Industrials are up 116 points. The dip-buyers are confident that the Fed will print forever and pump the markets higher. Tech and small caps noticeable lag the broad indexes which is a bearish indication. Financials struggle today. Bernanke stops the downward market slide and sends equity markets higher on the easy money promises.
On Wednesday, 2/27/13, rating agencies warn Italy that future downgrades may be on tap due to the political and economic instability. Italy is trying to form a coalition government; otherwise a second vote will be required. Draghi says the ECB is in “no rush to tighten” and is “far from considering an exit from monetary stimulus.” Germany and Italy spat over a German comment that said they were ‘horrified that two clowns won the election’. Italy takes offense to the comment straining the already strained Germany-Italy relationship. Durable Goods data is better than expected. The strong economic data over the last couple days is helping the markets. JOY, a global bellwether, reports strong earnings and guidance and this greatly encourages the bulls today. Chairman Bernanke speaks continuing to pump the markets higher. Bernanke says that the U.S. will likely not reach the 6% unemployment rate target until perhaps 2015 or 2016. The stock market explodes higher on this comment since it means the Fed will continue the QE as far as the eye can see. Keystone’s SPX 60-Minute Chart with 200 EMA Indicator signals bullish markets ahead. Ditto for Keystone’s SPX 30-Minute Chart Indicator showing the 8 MA cross above the 34 MA signaling bullish markets ahead. The Dow and SPX move above their 20-day MA’s but the Nadsaq and RUT do not. JPM’s CEO Dimon displays arrogance when responding to an analysts question saying, “I’m richer than you.” These simple words are disturbing since it alienates regular folks in the investing community, and perhaps Dimon should remember he was drinking form the Fed’s bailout trough in 2009 like all the other ‘too big to fail’ banks that created the credit crisis and Fall 2008 market crash. The ‘too big to fail’ banks are now actually bigger than in 2008.
At the closing bell on Wednesday, the SPX is up 19 points, +1.3%, to 1516. The SPX retraces the down move this week and now sits flat on the week. The Dow is up 175 points, +1.3%, to 14075, and is at a 5-year high now within 100 points of printing an all-time high. The Nasdaq is up 33 points, +1.0%, to 3162. The RUT is up 10 points, +1.1%, to 910. Tech and small caps have lagged the broad market the last two days, the opposite of what is expected for a healthy bull market. The volume today is only about three-quarters of a day’s average expected volume, not a strong endorsement of today’s euphoria. Copper (a key market indicator) selling volume is strongly outpacing buying volume over the last couple weeks. Gold continues selling off now at 1596. The 10-year yield jumps from 1.85% to 1.90% to verify the strong up move in equities. After the close, JCP collapses over 10% after reporting that retail sales are the lowest in 20 years. GRPN earnings are in line but the guidance is weak and the stock is mercilessly beaten, down 25%. Markets have no fear or worry over the sequester now only one day away. Traders fully realize the can will always be kicked so complacency is rampant in the markets. Bob Woodward, a noted White House biographer and journalist, says a White House aide warned him to not report any negativity against President Obama and if he did, he would “regret it.” The White House rushes to deny the threat. Futures appear unaffected by the news.
On Thursday, 2/28/13, Japan’s Abe nominates Karudo as the BOJ governor, as expected, and the Nikkei jumps higher since Karudo is very dovish and will print money as fast as possible to weaken the yen. Draghi says that Europe remains weak hinting that he will remain accommodative (he is trying to pump Europe like Bernanke pumps the U.S.). German unemployment unexpectedly drops to 6.9%. A WMT executive says that the stores are ‘getting worse’ at keeping shelves stocked. Retailers such as BKS, KSS, LTD and others report weak guidance moving forward placing into question the resiliency of the great American consumer. GDP is +0.1% remaining obscenely low despite over four years of Fed money-pumping. The U.S. shamefully amasses huge debt that all the young people will be responsible for and the pumping does not result in any growth. Today is EOM. The bell rings and the markets move sideways. JCP and GRPN are down over 20%. The broad market sells off into the closing bell but the Dow comes within fifteen bucks of a new all-time high from October 2007 at 14165. The SPX 1524-1525 resistance holds.
On Friday, 3/1/13, China manufacturing data shows activity slowing much more than expected. Germany manufacturing data improves but the U.K. worsens signaling a continued and now triple-dip recession. The European unemployment rate hits 11.9% another higher high. The euro drops towards 1.30. The S&P futures take a negative tone. Personal Income and Spending data shows spending up and income down; the largest drop in income in many years but some of it due to folks taking income in December to avoid the higher taxes this year. Consumer credit data shows loans increasing across all categories, house, student and auto. Think about it. Americans are buying more and more on credit while their incomes are dropping. Consumer Sentiment is better than expected. ISM data is better than expected. Construction Spending is down suggesting the housing recovery is not as robust as advertised. F vehicle sales are lower than expected. The small businesses and contractors should be buying F pick-ups hand over fist if the economy is strong. TM misses sales forecasts. The markets ignore bad news and only focus on happy news. After an opening drop, the broad indexes move higher all day long. This move is counter to the copper, oil and commodity markets that are all selling off strongly. The euro drops under 1.30. The dollar moves above 82. All asset relationships are working as expected except for equities, which should be selling off, but, instead are rising higher (lower copper, oil, commodities = lower euro = higher dollar = lower equities). There is a clear disconnect with the Fed’s easy money the likely reason for the pump in equities. The SPX is now called the ‘Teflon Market’. Speaker Boehner exits the White House meeting (Congress has left town so the White House meeting is only for show) and repeats the same message that the revenue increases occurred during the fiscal cliff, and now it is time for cuts. President Obama conducts a press conference stating his same position. The childishness on all sides continues and the Sequestration is set to hit in a few hours. Markets finish the week flat after the large roller coaster drop on Monday and then subsequent recovery during the week. The SPX is 1518. The Dow is 14090 only 75 points away from the all-time high. The RUT (small caps) finish lower on the week. AAPL is weak printing new lows. After the close, President Obama signs and announces the sequestration order. The cuts begin with a paltry 85 billion slated for this year. Defense industries require watching. The cuts should shave about 0.7% off GDP during the remainder of the year. A can-kicking solution will likely occur in March with all these political deadlines becoming wrapped up into one big budget discussion that will occur in late spring and through the summer, when the politico’s typically negotiate during the year. Warren Buffett releases Berkshire-Hathaway results (which hit all-time highs this week) saying that Berkshire will likely underperform the S&P 500 moving forward. Buffett chastises other CEO’s saying they should be more optimistic and stop talking about uncertainty.
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On Monday, 3/4/13, Fed’s Yellen and Powell speak.
On Tuesday, 3/5/13, ISM Non-Mfg Index. The National People’s Congress convenes. China President Xi Jinping and Premier Li Keqiang are now in 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 and private consumption, rather than an export-led economy, but a domestic economy will grow at a slower pace. The GDP projections will be of particular interest; 2012 grew at an average 7.8% rate.
On Wednesday, 3/6/13, ADP Employment Report. Factory Orders. Beige Book. BOJ meets for Shirakawa’s last meeting; the money pumping and yen weakening will continue.
On Thursday, 3/7/13, ECB Rate Decision 7:45 AM EST and Press Conference 8:30 AM. International Trade. Jobless Claims. Productivity and Costs. Consumer Credit.
On Friday, 3/8/13, Monthly Jobs Report. Wholesale Trade.
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On Wednesday, 3/13/13, Retail Sales. Business Inventories.
On Thursday, 3/14/13, PPI. Jobless Claims.
On Friday, 3/15/13, CPI. Empire State Mfg Survey. TIC data. Industrial Production. Consumer Sentiment.
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On Tuesday, 3/19/13, Housing Starts.
On Wednesday, 3/20/13, FOMC Meeting Announcement, Forecasts and Press Conference.
On Thursday, 3/21/13, Jobless Claims. Existing Home Sales. Philly Fed.
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On Tuesday, 3/26/13, Durable Goods. New Home Sales. Consumer Confidence.
On Wednesday, 3/27/13, the Continuing Resolution (CR) is required to fund the government.
On Thursday, 3/28/13, GDP. Jobless Claims. Chicago PMI.
On Friday, 3/29/13, Personal Income and Outlays. Consumer Sentiment. EOM. EOQ1.
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On Monday, 4/1/13, ISM Mfg Index. Construction Spending.
On Tuesday, 4/2/13, Factory Orders.
On Wednesday, 4/3/13, ADP Employment Report. BOJ meets with new members for two-day meeting; the money pumping and yen weakening will continue.
On Thursday, 4/4/13, Jobless Claims.
On Friday, 4/5/13, Monthly Jobs Report. International Trade. Consumer Credit.
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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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