Major storms are pounding scenic Pennsylvania overnight with buckets of rain. The early read on futures is lower but the JPM and WFC bank earnings, as well as PPI (Producer Price Index) and Retail Sales at 8:30 AM EST, will dictate the market tone to begin the day. The expectations are high for the bank earnings with analysts expecting blow-out earnings, so the risk would be to the downside since everyone is expecting stellar earnings. The drama will continue since markets will pivot at 10 AM-ish when Consumer Sentiment data is released at 9:55 AM and Business Inventories at 10 AM. The big news just hitting the wires is a new Cyprus mess. Cyprus sends a letter to the EU, EC and ECB requesting more money than the 10 billion bailout package that occurred a couple weeks ago. This is troubling since the mess is obviously more severe than originally thought. This news creates a couple handles of weakness in the S&P futures as traders are sorting out the impact right now. The euro drops to 1.3047. European stocks are hit across the board on the Cyprus news with the continent all red at this writing. Germany bond yields drop as money flees to perceived safety. Euro Finance Ministers meet for a two-day meeting.
Fed's Plosser speaks hawkishly last evening saying that the Fed should scale back on QE4 Infinity and Beyond, however, this constant game-playing by the Fed members is getting old. VW reports weak European automobile sales. India's Infosys reports weakness in the tech sector. The North Korea drama continues. The U.S. 10-year Treasury yield drops to 1.76% as folks continue to buy bonds for safety and are not rotating into stocks despite new daily highs in equities and media hype telling Aunt Betty to take her life savings and place it into the stock market since the train is leaving the station. The dollar/yen drops under 99, now back above; a day ago everyone considered 100+ a done deal. A higher dollar/yen pair reflects a stronger yen. The weaker yen, caused by the BOJ easing, is what fuels the SPX move to new highs recently. The SPX begins the day at a new all-time high at 1597.35 and new all-time closing high at 1593.37, so watch these price levels closely in today's trading. For the SPX starting at 1593, the bulls need to push above 1597 and it is off to the races higher, the 1600 and higher will print quickly. The bears need to touch the 1586 handle and that will accelerate a downside move today. A move through 1587-1596 is sideways action. Gold is at support again in the 1550-1560 area and everyone is talking gold down. GS downgraded gold yesterday. The charts are actually more agreeable to a basing for gold here, and to hold support in this area, and for a recovery move to occur form 1540-1550, however, gold likely has more sideways in it than anything. Gold 1546 prints as this is typed.
Watch the VIX as highlighted in last evening's chart. The bulls need to drop volatility at the open to achieve SPX 1600+, the bears need to send the VIX higher at the open to achieve their goals. The Masters is off to a roaring start with the world's top golfers all in the hunt and it is nice to see an international field at the top. The young 14-year old China golfer is a pleasure to watch; most 14-year olds are reading comic books and playing video games. Round two begins shortly. Keystone is tied up today so all of you will have to hold down the fort. All the wind bag analysis each day here provides plenty to watch today. Updates will likely be provided later in the afternoon.
Note Added 5:53 AM: Gemany's Meister says they will not back more aid for Cyprus. European Finance Minister Olli Rehn says that Cyprus may have to find the money from bank reorganizations and more pain from bank depositors. This drama will have to play out as the day moves along. Your money is not safe in banks anymore.
Note Added 7:13 AM: JPM earnings beat by 20 cents on EPS but are light on top line revenue. Same old story across all sectors; light revenue. JPM's knee-jerk reaction is flat to down in early trading. Markets will remain jumpy through the 10 AM data and then settle out as the day proceeds.
Note Added 4/13/13 at 7:24 AM: Volatility would not confirm the drop in the markets yesterday so the SPX recovered as the day moved along. Both the SPX and VIX finished lower which occurs less than 10% of the time due to their inverse relationship. Either the SPX should have printed new all-time highs yesterday, or, the VIX should be far higher, one of them was wrong, and this will likely be sorted out next week. Copper and commodities collapse; it is amazing to see markets brush it off without caring. WFC earnings were a repeat of JPM, beating on the bottom line but short on the top line. Retail Sales are at the weakest in nine months. Consumer Sentiment was much weaker than expected. Traders do not care about negative data, news or earnings. As long as the Fed and BOJ are dishing out fixes of easy money crack cocaine, the markets remain resilient. The dollar/yen dropped under 99 after teasing 100 a couple days ago. Lower dollar/yen pair means yen is strengthening (opposite of the BOJ easing actions) so the broad indexes were lower today. FXY (yen) was up today. Volatility and yen are two key items to focus on come Monday.
KS - what do you think might happen at the 12:30 Bernanke speech? Anything he might say that would spook the market higher?
ReplyDeleteChairman Bernanke commented about the disadvantaged middle and lower middle class. It should not be a surprise to him since he is causing the problem. He is pumping the markets higher with his 'wealth creation effect' so folks with money, and money in the markets are getting richer off his easy money policies, while the middle and lower middle class are not benefiting since they have very little in the markets, while at the same time the 'wealth effect' is not working and not creating jobs to help the disadvantaged folks. The rich are getting richer and the poor are getting poorer. At the same time, all the QE is digging a deeper hole of debt with nothing to show for it except the wealthy becoming wealthier.
DeleteKS, can you please spend some time this weekend commenting on your Inflation-Deflation timer, now showing 2.80. Incredible. All that QE and deflation is still here. (Markets used to go down in that kind of environment. This time?)
ReplyDeleteThere is a disconnect among many asset classes now. The 10-year Treasury yield drops to 1.72%. This shows that money is moving into both bonds and stocks, there is no rotation from bonds to stocks. therefore, the central banker money pumping is causing the move higher in equities. It is amazing to see copper and commodities collapse but traders no longer care about fundamentals, the Fed and BOJ crack cocaine provides the juice higher.
DeleteInteresting, most down days are negated at ~11-12am (11.30 to be almost exact). That's when Europe's markets close (4:30pm their time)... What does that tell us? European money fleeing it's home continent seeking a (perceived) saver heaven. Just watch it happen, day after day after day. When the curtains fall for the day in Europe, the bots start moving money to the US... While your and mine and joe blow's foreign transactions take days, and cost you tens of dollars, these banking-lines are wide open; free for all bankers. As KS said it bes: "it's a big club, but you ain't in it"...
ReplyDeleteThe morning hours 10-11 AM is when the Fed purchases are pushing the equity markets higher. Both the Fed and BOJ easy money is what pushes markets higher from the morning bottoms.
DeleteTICK hod 937
ReplyDeleteTICK lod -937
Never seen them close at the same digits.
They settled out a smidge different but your point is interesting. The limits on each side are explored with markets meandering sideways. TRIN was elevated all day long but the bears did not get much bang for the buck.
DeleteNote that the SPX was down and the VIX was down, you do not typically see this since they are inversely correlated. One of them is wrong.
ReplyDelete