On Saturday, 4/20/13,
Baron’s magazine newspaper cover proclaims; “Dow
16,000.” Many times the
headlines help identify tops and bottoms in markets from a contrarian
perspective. The G-20 is unconcerned about the BOJ yen
devaluation so the equity markets will rally on a weaker yen as they did
on Friday (weaker yen creates a higher dollar/yen pair and higher equity
markets). The politicians instead choose
to label Japan’s currency debasement as a program that is addressing deflation
and targeting 2% inflation. The futures climb higher. Chairman Bernanke will not attend the
Jackson Hole conference this year due to a scheduling conflict. Each
summer traders look forward to Jackson Hole since the Fed always announces a
new QE program in this time period. Is Bernanke signaling the markets to not
expect further QE? The Fed is likely
worried about the new asset bubbles created in the dividend and perceived safe
haven stocks due to the current easing.
----------------------------------------------------------------
On Monday, 4/22/13, Nikkei and Japan auto manufacturers bounce strongly on
the weaker yen. The dollar/yen
moves higher to tease the 100 level again. Fitch downgrades the U.K. following along after Moody’s downgrade last week.
The Italy election drama continues with the
reelection of the aging president and hopes continue that a government can be
formed. Europe remains
surprisingly resilient as recession and depression continues. The S&P
futures are up nine on the weaker yen. Crude
oil moves up from the sticky 88 level.
Brent briefly moves up over 100. CAT earnings cough
up a hair ball missing on both the top and bottom lines and guidance is reduced
moving forward. CAT is a key
proxy for China and trades flat since the bad news was expected. GE is downgraded. China says that
some short term pain may be required to set up a stronger future. The
broad indexes trade sideways after the opening bell and then drop on the disappointing Existing
Home Sales. Interestingly, a few minutes after the open, GOOG experiences a
mini flash crash, dropping -3.5% in one minute’s time then recovering. These mini
flash crash events are becoming more and more common. Putin says that Russia’s economy will likely remain in a malaise moving forward. Crude
oil continues to fight at the 88 level and Brent at the 100 level. Copper continues to collapse. As the day moves along, Keystone’s 60-minute chart shows the SPX
moving above the 200 EMA signaling bullish markets for the hours and days
ahead. At 2:50 PM, a moment of silence is observed in Boston and at
the exchanges in honor of the three deaths and the many wounded in the
terrorism attack last week at this time. Into the closing bell, the SPX fights to regain the 20-day MA at 1564
but closes below at 1562. Tech is strong
today while small caps are weak. Canada
thwarts a terrorist attack, that was planned against a passenger train, but the
markets do not react negatively on the news. After the bell, NFLX earnings
beat estimates and the stock soars higher. TXN earnings are in line and it receives
a lift. The U.S. airplane traffic is
snarled with delay’s due to the sequestration cuts. Customer complaints are increasing.
On Tuesday, 4/23/13, China PMI data is weaker than expected. Copper,
commodities and materials markets are sold off. France PMI comes in better than expected but Germany, and
Europe in general, is worse.
The euro
drops under 1.30. Europe
warns the U.S. about banking regulations. The BOJ easy money is chasing European
bonds with the Germany 10-year yield briefly
dropping under 1.20%, a historic low. The 10-year
Treasury drops to 1.66% not seen since December 2012. DD, UTX, TRV and
other earnings reports all beat their lowered EPS estimates but the trend continues with weak top line
revenues. Companies are meeting EPS due to laying off or beating existing
employees, not by growing the top line sales. The S&P futures are all over the map,
down seven early this morning, then up seven, now up about four. The opening bell rings and the broad markets launch higher. The dollar/yen is
moving higher to 99.40 and the weaker yen takes equity markets higher. The
SPX tests the key 1576 resistance level and moves up through to print a HOD at
1579. New Home Sales are lackluster and
manufacturing data is weak but traders do not care since the Fed and BOJ are
pumping the markets higher with easy money.
YUM is downgraded ahead of
its earnings later today. Keybot the Quant algorithm flips to the long side at SPX
1569. At 1:07 PM EST, the AP’s Twitter
account is hacked and a message is
released on Twitter saying the Whitehouse is under attack and Barack Obama is
injured. Within a couple minutes, the Whitehouse rebuffs the story and in quick
order it is exposed as a hoax and fake tweet. One tip-off was that the
President’s tweet would not say Barack, it should say President Obama if
legitimate. However, the broad indexes experience a mini
flash-crash dropping -1.1% in a few minutes time. The whole flash crash event took about ten to
fifteen minutes from where prices fell and then recovered back to the levels
prior to the flash crash. The SPX dropped 16 handles and the Dow dropped
151 handles. The mini flash crashes are now occurring across indexes and
individual stocks, such as GOOG, with a frequency of every few days (type
‘mini flash crash’ into the search box to the right to view the charts). The bulls enjoy a strong start to the week,
fake tweet and all, with the SPX up well over 20 handles in two days time. Strong financials and semiconductors and
lower volatility provides the bull fuel. After the bell, T earnings beat
bottom line but miss on the top line revenue as does most other company these
days. Companies are meeting EPS not due
to robust sales but rather due to cutting expenses and employees and whipping
the current employees to produce more with less. AAPL reports earnings that
are in-line and announce an increase in buybacks which launches the stock after
hours. Interestingly, in the conference
call, Apple admits that sales estimates will
be lowered moving forward and also that a wider Smartphone screen, that would
be more in line with Droid Smartphones, is not
in the works for the iPhone and Apple is sticking with the skinnier iPhone
screen. AAPL was up over 420 AH’s and immediately plummets to the closing price
at 406 on this news.
On Wednesday,
4/24/13, German sentiment is weaker than expected. Earnings continue to show beats for the
bottom line EPS but miss on the top line revenues. The weakening
yen has a direct impact on the equities markets these days. As the dollar/yen
goes, so goes the equity markets.
The high-yield investment
instruments are in bubble territory. All the folks chasing yield will
likely experience a rude awakening moving forward. The markets open and travel flat all day long. Dividend
stocks are slapped perhaps as traders realize these stocks are pumped far
too high on central banker easy money. T is down -6%
today, PG down -5% and LLY down -3%. Interestingly, the drop in
these stocks wipe out the yield in only one day. The 3 to 7% yield on dividend stocks will not
appear attractive if the price of the stock is 20% lower a few months from now.
Durable Goods Orders are weaker than
expected. The CPC put/call ratio is in the 0.7’s again signaling
complacency and a market top occurring.
On Thursday, 4/25/13,
China banks are negatively impacted by bad real
estate loans. U.K. GDP is a smidge positive so a triple-dip recession is
avoided. Spain unemployment rate is 27.2%, the highest
in 37 years, at the same levels of the Great Depression in the U.S. in the 1930’s.
Spain is now in seven quarters of recession. Bellwether UPS earnings are in
line which provides a boost to equities. The markets open but a software glitch
occurs shutting down the CBOE options trading for three and one-half hours. The
flash crashes and exchange outages are
occurring far too often these days. The CBOE is back on line after lunch but the reason for the outage is
not clear. The markets leap higher
regardless of the CBOE outage with the SPX
testing the 1593 all-time closing high but unable to push above. At about 2 PM, Germany’s Bundesbank voices concern over
the ECB’s OMT bond-buying program. This is no surprise since Germany
has always held this position, but the stock
market sells off and trails lower into the closing bell. The SPX prints the
highs for the week at 1593 and closes at 1585.
The 10-year Treasury yield
continues to travel through a tight two-week sideways range of 1.68%-1.72%. The
sequester cuts at the airports are
causing multi-hour delay’s with the flying public now voicing anger over
the political games. Folks are mad at
Congress’s incompetence rather than the FAA. After the bell, AMZN and SBUX
beat on EPS but both miss on top line
revenue, again repeating the ongoing weak
sales theme. The Nikkei charts are
topping out showing that the yen debasement may need to take a rest. The NYMO chart signals
a market top in place now.
On Friday, 4/26/13, BOJ maintains the pledge for stimulus but data shows the
deflation continues. The yen actually strengthens on the news, so
the dollar/yen drops to 98.64 from well over 99 yesterday and equity futures
move lower. Analysts are now questioning if the dollar/yen will reach the
psychological 100 level. The Nikkei is
up an obscene 35% this year purely due to money-printing. The Japanese banks and auto manufacturers benefit
from the weaker yen created by ‘Abenomics’. Spain protests flare-up with rioters
clashing with police over the austerity and 27% unemployment rate. Portugal protests heat up as well.
Two million households in Spain have no one in the family working. Protestors are now targeting individual politicians and
others perceived to have created the current fiscal mess; a new and troubling
twist in the debt saga. All politicians, bankers and other power
brokers around the globe are watching this new societal development with grave
concern. Perhaps pitchfork and torch stores will open up on city
street corners. The general public is up
in arms since the bankers that created all the economic problems were bailed
out and are now wealthier than ever, and the too-big-to-fail banks are larger
than ever, while individual citizens are struggling each day mired in
unemployment with taxes and other expenses increasing daily. The ECB says the
bond-buying program may not be needed going forward since yields have calmed. The BOJ
easy money is finding its way to European bonds causing the drop in yields
so the reason for calmer yields is not due to a recovering Europe, but rather
more central banker intervention in markets continuing to distort price
discovery. About 4% of Cyprus’s money deposited
in banks was pulled over the last month, perhaps a bit under what would be
expected since money is no longer truly safe in banks. Of great interest is that the other European
nations do not show significant outflows from bank deposits so folks do not
appear worried about losing money when a bailout occurs. Go figure.
Gucci reports the weakest sales in three years indicating that the wealthy continue to cut back on spending.
Merkel softens the rhetoric from the Bundesbank comments yesterday.
The initial read on Q1 GDP is 2.5%, weaker than the expected 3.2%.
The markets open and sell off. The Consumer
Sentiment is in line with estimates but markets sell off further with the SPX
at 1578 at lunch time. Volatility moves strongly higher signaling trouble for
markets but then trails off lower into the closing bell allowing the broad
indexes to recover. The flat day ends with the SPX at 1582 failing to print all-time highs this week. The Dow closes at 14713. For the week, the
SPX is up 1.7%, the Dow up +1.1%, the Nasdaq
up +2.3% and RUT up +2.5%. Tech and
small caps led higher which is a plus for the bulls. Semiconductor’s are up 4.4% this week. The parabolic
move in utilities continues as traders use the Fed and BOJ easy money to fuel new asset bubbles in dividend stocks,
utes, REIT’s, high-yield instruments, healthcare and other perceived safe
havens. Congress passes stop-gap measures to remedy
the airport problems caused by the sequester cuts; of course just in time for themselves to fly home for a short recess.
---------------------------------------------------------------
On Monday, 4/29/13,
Personal Income and Outlays. Pending Home Sales.
On Tuesday, 4/30/13,
EOM. Chicago PMI. Consumer Confidence. 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.
--------------------------------------------------------------
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.
--------------------------------------------------------------
On Monday, 5/13/13, Retail Sales. Business Inventories.
On Tuesday, 5/14/13,
Import and Export Prices.
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.
---------------------------------------------------------------
On Wednesday, 5/22/13,
Existing Home Sales. FOMC Meeting Minutes.
On Thursday, 5/23/13,
Jobless Claims, PMI Mfg Index. New Home Sales. 10-Year TIPS Auciton.
On Friday, 5/24/13, Durable
Goods Orders.
--------------------------------------------------------------
On Monday, 5/27/13, U.S. Markets are Closed in Observance of Memorial Day.
On Tuesday, 5/28/13, U.S. Markets Open for Trading. Consumer Confidence.
2-Year Note Auction. The 16.4 trillion Debt Ceiling limit is hit,
however, the government is taking in
more revenue than expected, the sequester cuts are in place, and Congress is
developing a plan to extend the Debt Ceiling
deadline to August or September, so this can will likely be
kicked about three months into the future. The politicians are trying to line up all the problems, debt ceiling,
fiscal cliff, and CR resolution to fund the government, for a combined
August-September deadline thus providing this summer as the time to conduct a
knock-down drag out political fight to set the U.S. on the correct fiscal path
forward. This political behavior is similar to the summer of 2011 which
did not receive a happy ending.
On Wednesday, 5/29/13,
5-Year Note Auction.
On Thursday, 5/30/13,
Jobless Claims, GDP. 7-Year Note
Auction.
On Friday, 5/31/13, EOM. Personal
Income and Outlays. Chicago PMI. Consumer Sentiment. Farm Prices.
----------------------------------------------------------------
On Monday, 6/3/13,
PMI Mfg Index. ISM Mfg Index. Construction
Spending.
On Tuesday, 6/4/13,
International Trade.
On Wednesday, 6/5/13,
ADP Employment Report. Productivity
and Costs. Factory Orders. ISM Non-Mfg Index. Beige Book.
On Thursday, 6/6/13,
Jobless Claims.
On Friday, 6/7/13, Monthly Jobs Report.
---------------------------------------------------------------
In September, Merkel (Germany) seeks re-election and will not want to see Greece or other nations exit
the euro before the election but will not care afterwards. Perhaps Greece and
others, or Germany, may 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. Will Yellen, even more dovish, likely wanting to see QE
Infinity and Beyond placed on steroids, take the reins?
In March 2014, the
ESM is
officially “fully operational.” The banking union schedule has been delayed from January 2013 to January
2014 and now to March 2014.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.