Keystone's Trading Week in Review and Path Ahead 4/13/13

On Friday, 4/5/13, the Japan bond markets are reacting erratically with a drop in the 10-year yield into the 0.3%’s, then catapulting into the 0.6%’s, then back down to the 0.4%-0.5% area; phenomenal action that creates concern around the globe.  Soros warns that Japan is engaging in dangerous and risky business.  The S&P futures trail lower ahead of the Monthly Jobs Report that produces a paltry 88K jobs when 200K or more was expected.  The unemployment rate dropped one tick to 7.6% but this is due to folks simply giving up hope of finding a job, so they are no longer counted. The labor participation rate is the lowest since 1979 with one-half million folks leaving the work force. Retailers drastically reduce employees as the tax hikes are cutting into consumer spending. Less traffic is noted at restaurants.  The futures plummet on the news with the S&P’s down -20. The Dow futures are down -165 and Nasdaq -35. The 10-year yield collapses under 1.70% down to 1.67% fostering the deflationary theme.  Markets tumble at the opening bell but the dip-buyers, hooked on the Fed’s crack cocaine, trip over themselves to buy long, and the markets recover as the day moves along.  Consumer Credit grows as the demand for automobile loans and student loans increase far more than expected. The auto loan numbers verify the new subprime auto bubble. If you can fog a mirror, you can drive off the car lot in a brand new Caddy. The SPX recovers off the low at 1539 to close at 1553, down 7 points on the day, -0.4%, and closes down one percent on the week. The Dow is flat on the week at 14565. The Nasdaq is down -2.0% on the week to 3203. The RUT is down -3% this week to 923. Tech and small cap weakness indicate trouble for markets moving forward.  The break down in semiconductors this week is very bearish for markets.  In addition, new asset bubbles in dividend stocks, healthcare, staples, utes, and other perceived safety plays, are verified by the flat Dow this week. Utilities have gone parabolic with UTIL at 515. The market sentiment remains complacent with markets not climbing a wall of worry but instead climbing the wall of Fed easy money. The Italy mess continues with a new election becoming more likely.  Sadly, an Italian couple, representative of the financial and social problems currently plaguing Italy, commits suicide to escape their daily struggles, and a third person, the brother of the woman, also commits suicide.  The tragic news gains attention across Europe and the world.

On Saturday, 4/6/13, the EU’s Rehn says that a new directive under development may require large bank depositors to assume losses for future bank failures. The InTrade on-line betting site is 700K in debt and appears insolvent.

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On Monday, 4/8/13, the dollar/yen leaps to 99 as the yen weakens to a 4-year low.  The Nikkei prints over 13200, up over 3% today, on the money pumping.  TM is up over 4%. Other Asian markets drop on the bird flu concerns; airlines are down but drug companies are up.  China property bubble fears are increasing.  Xi tamps down China’s growth projections and says the “global recovery remains elusive” and “protectionism is on the rise.” Greece’s two main banks fall 30% since this troubled nation cannot meet the Troika requirements.  Portugal 10-year yield leaps to 6.5% signaling trouble with their bailout agreement.  The France 10-year yield drops to a record low 1.72%, Germany drops to 1.22%, as money moves out of Portugal and Greece into the perceived safer haven countries. Prada, the luxury shoe retailer, indicates a large drop in spending. Pirelli says tire demand in Europe is very weak; rubber is a key indicator of economic health.  Eurozone sentiment is down for the second month in a row below estimates. The euro is at 1.30. The ‘Iron Lady’, Margaret Thatcher, passes. The bears have the upper hand to start the day but the bulls push the VIX under 14 and send the broad indexes higher into the close. Keystone’s SPX 30-minute chart shows the 8 MA moving above the 34 MA signaling bullish markets ahead.  The SPX closes at 1563 recovering all the downside, then some, from the weak Jobs report last week.  The central banker QE money pumps continue to elevate markets. AA earnings kick off the Q1 earnings season with numbers in line but top line revenues miss continuing this ongoing trend in the markets. Chairman Bernanke speaks in the evening and says the banks need to reduce liquidity risk.

On Tuesday, 4/9/13, China inflation data is in line. New toxic water leaks are found at Japan’s troubled Fukishima site. Germany export data is weaker than expected since other countries are debasing but Draghi has not.  Slovenia faces a debt crisis. The Dow Industrials print new all-time highs and the SPX prints a new intraday high for 2013 at 1573.89 (two points away from the all-time high at 1576.09) but retreats during the last hour of trading. The RUT (small caps) finish down on the day. The CPC put/call ratio is an uber low 0.67 which equals the levels where the August 2011 waterfall crash occurred as well as the major market pullbacks in May 2012 and October 2012.

On Wednesday, 4/10/13, China exports are weaker than expected. Soros says the Euro crisis is far from resolved and Eurobonds (which Germany is against) is the solution. Troika recommends extending the duration of the Irish and Portugal loans. Portugal bond yields increase causing concern. GS lowers its gold forecast. At 9 AM, the Fed says the FOMC Minutes were mistakenly released ahead of time to certain individuals yesterday (no wonder the markets rallied) so the Minutes are released before the opening bell ot everyone else.  At 9:36 AM, after the opening bell, the SPX punches through the previous all-time high at 1576.09 officially printing a new all time high at 1589.07 and new all-time closing high at 1587.73 finally joining the Dow Industrials that continues to print new all-time highs day after day.  The Fed and BOJ easy money is pumping U.S. equities higher especially the Dow and SPX while global indexes remain lackluster. Utilities print new multi-year highs day after day as investors seek yield and safety but with UTIL printing nearly 523 intraday, rising one percent per week since November 2012, things are out of hand with prices bloated to lofty levels. This behavior is taking place across all dividend stocks fueling bubble behavior. Folks are simply buying dividend stocks for the divvy and the perceived safety regardless of price. The tech sector and small caps recovered strongly today outpacing the broader market. Global PC shipments fall by a record low for Q1.  The FOMC Minutes early release was given to all the major banks on Tuesday afternoon enabling them to trade off news and benefit from the market upside.  Gold declines on news of Cyprus selling gold to pay off debt as well as the GS downgrade. YUM, a bellwether for China, says sales are weakening significantly.

On Thursday, 4/11/13, Monti says Italy’s debt will rise to a record low. Slovenia is a growing problem but Euro leaders are already calling it a unique situation like Cyprus. China trade data is coming under increasing scrutiny since the export numbers simply do not line up with global data. The China exports are far weaker than the numbers the government is reporting.  GS downgrades MSFT based on the weak global PC sales. COST sales miss estimates.  Jobless Claims drop 42K reversing last week’s steep rise.  The 30-Year Bond Auction results in the yield remaining under 3%.  The markets jump higher at the opening bell and the SPX prints a new all-time high at 15397.35 at 11 AM. A new all-time closing high is printed at 1593.37. Bearish economists and traders turn bullish as short traders throw in the towel and everyone believes the Fed and BOJ will continue sending markets higher forever (view this from a contrarian perspective). The dollar/yen comes up towards 100 but stops just short of this psychological level (higher dollar/yen pair is due to the BOJ weakening the yen which is the main driver of the recent new highs in the SPX).

On Friday, 4/12/13, VW reports weak automobile sales in Europe. European Finance Ministers meet for a two-day meeting to discuss the Eurozone problems. New problems surface in Cyprus where more money, above the 10 billion bailout, is already needed. Cyprus sends a letter to the EU, EC and ECB requesting more help. The bailout numbers for Cyprus now exceed their GDP. Germany’s Meister says they will not back more aid for Cyprus.  European Finance Minister Rehn says Cyprus may have to find the money from bank reorganizations and more pain from bank depositors. World leaders simply dig deeper holes of debt since no one wants to face the deleveraging music. IMF cuts the U.S. growth forecast. JPM earnings beat by twenty cents on the EPS but come in light on top line revenue.  The ongoing theme of light top line revenues continues across all sectors. JPM trades lower in the pre-market. WFC follows the same path as JPM, beating on EPS but with less than expected top line revenue.  WFC trades lower. Wells Fargo is an important barometer for the housing sector.  Retail Sales decline by the most in nine months.  The bad news sends bonds higher, the yields lower; the 10-year Treasury yield drops to 1.72%. The broad indexes drop at the opening bell with the SPX losing about 7 points in the first few minutes. Consumer Sentiment takes a sharp drop lower to 72.3 far below estimates showing an unenthusiastic consumer likely concerned over high gasoline prices and the ongoing lackluster economy. The stock market collapses on the sentiment numbers with the SPX dropping from 1591 to 1580 in one hour’s time.  Keystone’s SPX 30-minute chart shows the 8 MA moving below the 34 MA signaling bearish markets ahead.  The Fed and BOJ money-printing, however, floods into the market as the morning proceeds, like any other day, and the markets recover into the closing bell. Traders ignore bad economic news and disappointing bank earnings. Copper and commodities collapse today, the building blocks of a global economy, but traders do not care.  Traders are fully hooked on central banker easy money crack cocaine and bad news is actually great news since the money printing will continue indefinitely and stocks will be pumped higher forever.  The asset relationships between copper and the markets, commodities and the markets, Treasury yields and the markets, and many others, have broken down due to the central banker’s intervention. Traders continue to pump the housing, retail and healthcare stocks today shrugging off the bad news. The utilities are actually up on this down day, with the utility and dividend bubbles growing ever larger. UTIL closed above 523. The dollar/yen dropped under 99 today after almost touching 100 yesterday. A stronger yen (lower dollar/yen) creates downward pressure on equities while the weaker yen, due to BOJ easing, creates the recent thrust higher in the U.S. equity markets. The Dow finishes flat today showing how money continues to chase into the perceived safe havens and dividend stocks. The SPX and Nasdaq are down -0.2% and the RUT down -0.4%.  Small caps and tech are not leading which is what would be expected for a strong market. Nonetheless, the bulls ran relentlessly higher this week with the broad indexes all gaining over 2% this week and the SPX printing new all-time highs.

On Saturday, 4/13/13, Secretary Kerry warns North Korea to stop the aggression. The U.S. Treasury warns Japan to not actively weaken the yen. Obviously, the Fed realizes that the drastic drop in yen is causing the latest upside thrust in U.S. equity markets and is becoming concerned over market asset relationships breaking down.  Traders are simply pushing markets higher on the central banker QE.

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On Monday, 4/15/13, the IRS deadline for tax returns. North Korea’s key anniversary date. Empire State Mfg Index. TIC data. C earnings.

On Tuesday, 4/16/13, CPI and Housing Starts. Industrial Production. Fed’s Duke, Kocherlakota and Yellen speak.

On Wednesday, 4/17/13, Beige Book. Fed’s Stein, Bullard and Rosengren speak.

On Thursday, 4/18/13, Jobless Claims. Philly Fed. Leading Indicators. Fed’s Kocherlakota and Raskin speak.

On Friday, 4/19/13, OpEx.

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On Monday, 4/22/13, Existing Home Sales.

On Tuesday, 4/23/13, PMI Manufacturing Index. New Home Sales.

On Wednesday, 4/24/13, Durable Goods Orders. 5-Year Note Auction.

On Thursday, 4/25/13, Jobless Claims. 7-Year Note Auction. Full moon.

On Friday, 4/26/13, GDP. Consumer Sentiment.

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On Monday, 4/29/13, Personal Income and Outlays.

On Tuesday, 4/30/13, EOM. Chicago PMI. Consumer Sentiment. FOMC two-day meeting begins.

On Wednesday, 5/1/13, ADP Jobs Report. PMI Mfg Index. ISM Mfg Index. Construction Spending. FOMC Meeting Announcement.

On Thursday, 5/2/13, ECB Rate Decision and Press Conference. Jobless Claims. International Trade. Productivity and Costs.

On Friday, 5/3/13, Monthly Jobs Report. Factory Orders. ISM Non-Mfg Index.

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On Tuesday, 5/7/13, 3-Year Note Auction.

On Wednesday, 5/8/13, 10-Year Note Auction.

On Thursday, 5/9/13, Jobless Claims. Wholesale Trade. 30-Year Bond Auction.

On Friday, 5/10/13, Treasury Budget.

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On Monday, 5/13/13, Retail Sales. Business Inventories.

On Wednesday, 5/15/13, PPI.  Industrial Production.

On Thursday, 5/16/13, Jobless Claims, CPI and Housing Starts. Philly Fed.

On Friday, 5/17/13, Consumer Sentiment. Leading Indicators.

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On Sunday, 5/19/13, the 16.4 trillion Debt Ceiling hits.

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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.

In Q4 2013, European bank stress tests will occur.

On Friday, 1/31/14, Chairman Bernanke’s term ends at the Fed, unless there is news during Q4 2013 that he will stay on.