On Friday, 5/10/13,
the G7 meeting begins. The dollar/yen
jumps through 101 to 101.60 with analysts now targeting 105-110 by the end of
the year. The Japanese are debasing
the yen and traders are jumping on the momentum
trade. Fed’s Plosser voices concern over
too-big-to-fail banks but this would be expected since he is a hawk. The
futures are
higher following the path of the dollar/yen (the BOJ money pump). Italy manufacturing data is weak but the MIB rocks over one percent higher since
weak data means more central banker easy
money (bad news is good news). Markets
have become completely dependent on the central bankers money-printing
policies. Marty Feldstein, noted economist, says the Fed’s policies have
hit a dead end. Chairman
Bernanke speaks but the comments are not market-moving. The markets meander sideways to begin the
day. Keystone’s
30-minute chart shows the 8 MA stabbing down through the 34 MA signaling
bearish markets for the hours ahead.
The new moon and an eclipse occur last evening and the SPX is weaker
through the new moon, as would be expected, dropping from a 1635 high to a 1623
low this morning. In the afternoon, volatility
drops lower and commodities run higher adding bull fuel to the broad indexes. The
indexes fly higher into the closing bell
to end the week on a happy note. Short sellers avoid the market, long players
have no intent on exiting the market, and the retail investor is sucked in on
the late day bullish euphoria. The SPX ends the day with a new all-time closing high at
1633.70 but does not print a new
intraday all-time high. The Nasdaq and
RUT print new all-time highs at 3436.58 and 975.16, respectively,
showing a push higher in tech and small caps today. Traders rotate from the utilities sector into tech, industrials,
materials and financials. For the week,
global indexes are all up from one to two percent on the central banker easy
money. Gold drops -1.5% this week to close at 1448. The Benghazi terrorism scandal continues to
unravel with a testy press conference occurring at the Whitehouse. The president’s spokesman attempts to handle
the discrepancies in documents and whistle blower testimony weighted against
the Whitehouse’s actions, especially Secretary Clinton, but things are not
adding up. Traders are not paying attention to this drama right now but if the
scandal unravels further, affecting the negotiations over the debt ceiling,
sequester and ongoing fiscal mess, Benghazi-gate, as the republicans call it,
will become a problem for markets. Further complicating the political
atmosphere, the IRS issues an apology
stating that they had singled-out and targeted the ‘Tea Party’ and other groups
with words such as ‘patriot’ in their returns, which is obviously
unconstitutional. Morality is thrown out
the window in the States ever since the banks were bailed out in 2009. The U.S. and U.K.
withdraw diplomatic staff from Libya. The northern Africa and Middle East turmoil increases and traders do not
have any geopolitical risk priced into markets currently. At 7 PM, under
the cover of darkness, Jon Hilsenrath,
who many believe has the inside track at the Fed, releases an article about the Fed tapering QE. The rumor of this pending article is what
caused the big drop in the SPX on Thursday afternoon but all was forgotten for
the Friday session. The article
rehashes what is already known but it will be interesting to see if the
markets react negatively next week as traders hear the word ‘taper’. The CPC put/call ratio prints 0.75 showing
complacency and fearlessness in markets indicating a significant top is
occurring in the broad indexes right now.
On Saturday, 5/11/13,
Barron’s front cover reads “This Bull Has Room to
Run.” Also on the front cover,
“Why Jeremy Siegel says the Dow could hit 17,000 by the year end.” Turn
only two pages to move past the full page ads and the Table of Contents hits
you square in the eyes, “This Bull Shows No Sign of Slowing.” Turn a
couple more pages and read “…..if the unstoppable S&P 500 reaches 1700—now just
4% away—or 1800, or 1900, …..”
You get the idea. Typically, bullish
magazine and newspaper covers and headlines are signs of a market top.
--------------------------------------------------------------
On Sunday, 5/12/13,
a scandal surfaces at Bloomberg where
allegedly reporters have been monitoring investment bankers and other high
profile individuals’ data terminals to gain information not otherwise available.
The breach opens a door to insider trading concerns or other potential
nefarious activity. At 7:20 PM, the dollar/yen punches up through 102 (weaker yen
continues due to G7 leaders providing a nod), however, falls back under in short order.
Standard Charter bank is sold off on news that Carson Block, noted
short-seller, is shorting the bank. France
continues to assess a SARS virus case finding that the virus can be passed
between humans after extended contact.
On Monday, 5/13/13, the
sun erupts with X1.7-class and
X2.8-class (strongest flare of 2013 so far) solar flares and two coronal mass
ejections (CME). The sun’s solar
cycle peaks this year and activity
may be ramping up strongly which will affect electronics, communications,
satellites, and of course markets if the solar flares and ejections score a
direct hit on earth. The dollar/yen is sticky at 101.80-ish
after last evening’s breach of 102. Futures are lower on weaker China industrial production data.
Retail Sales
are slightly better than expected which sends futures higher. Markets
open and drift lower but Business
Inventories at 10 AM create a low print for the day. Keystone’s SPX 30-minute chart shows the 8
MA moving up through the 34 MA signaling bullish markets for the hours ahead.
Copper is weak. Volatility is flat. The Bloomberg
data terminal scandal grows. Prime Minister Cameron (U.K.) meets with
President Obama at the Whitehouse but only two questions are allowed preventing reporters from gathering details
on the Benghazi scandal as well as the IRS scandal. Morality has taken a
hit over the last few days with corruption in markets, media, government and
politics occurring at all levels. The SPX eeks out
a new all-time closing high at 1633.77 seven cents above
Friday’s closing high at 1633.70. The SPX prints a new all-time intraday high at 1636.00.
On Tuesday, 5/14/13,
Fed’s
Plosser says lower inflation is not a concern, perhaps running cover for Chairman Bernanke, a scholar of the Great
Depression, who is fearful of deflation. The Fed likely realizes that more harm
than good is now occurring with QE (with the markets melting-up) and does not
want traders to pump equities higher at the current rate. Dollar/yen
is moving lower to 101.40 (stronger yen). German ZEW sentiment is weaker than
expected. A PEW study shows European social mood is becoming gloomier,
especially in France. The Italy 10-year yield moves above 4%. Spain’s 10-year
yield is also up to 4.35%. The euro/dollar is flat
at 1.2981. A second SARS virus
case is discovered in France. The Federal
government may now probe Bloomberg over the alleged spying of customer accounts;
the situation is now dubbed ‘the
Bloomberg Breach’. Copper is weak. Futures are negative until David Tepper, Appaloosa Management, talks bullishly and the markets immediately move higher.
Tepper, a native Pittsburgh boy, is known for his bullish call in late 2010
after QE2 was announced, which resulted in the ‘Tepper Rally’, so traders listen when he talks. Tepper warns that the “short-sellers better have a shovel
to dig out of their graves.” Markets open and march higher with a mini Tepper
Rally. The SPX prints a
new all-time closing high at 1650.34 and new all-time high at 1651.10.
The Benghazi and IRS scandals continue
to unravel for the Whitehouse.
On Wednesday,
5/15/13, JGB (Japan) bond yields are jumping
higher. The BOJ is buying over 70% of bond issuance so the JGB yields should
remain flat. The Nikkei prints above 15K,
a 5-year high, on the power of BOJ central banker easy money. German and
Italy GDP’s are weaker than expected. Italy is negative for seven consecutive
quarters the longest period since
records began in the early 1980’s. France
slips into recession. There is no
growth in Europe since September 2011, about two years ago. Euro-area GDP declines -0.2% in Q1 worse
than expected. In this age of
central banker intervention, however, traders
realize that more quantitative easing will occur (bad news is good news) and instead
of markets selling off the European
markets actually move higher with indexes printing at new highs. The euro drops under 1.29. HSBC is
considering 14K job cuts. Mortgage Applications drop with less refinancing occurring as well as less general loans to home-buyers. The hedge funds and cash buyers are creating
the housing sector push higher hoping to cash-in on a generational bottom
in real estate, however, they are likely all premature. Global
bellwether DE lowers guidance moving forward with lower equipment sales
expected. Empire State Mfg Survey disappoints. Industrial
Production is weaker than expected declining buy the most in 8 months. Markets do not care about weak earnings and data,
however, since it only means the Fed will provide more QE and send stocks
higher. Bad news is truly good news in these
bazarro markets. The markets open and the broad indexes move higher to print new
all-time highs again. Oil and gasoline inventories increase so oil sells off with WTIC crude oil dropping
under 95. Copper, metals and commodities are all weak.
The Whitehouse scandals continue to make news. President Obama summons Treasury officials
to meet and discuss the IRS investigation. GOOG moves above 900.
Gold loses the 1400 level. The SPX closes at a new all-time high at 1658.78 and new
all-time intraday high at 1661.49.
After the close, CSCO beats on earnings
which will likely provide the tech sector a strong boost tomorrow. President Obama
announces the firing of the IRS chief
due to the ongoing IRS scandal where
conservatives and republican organizations were targeted and held back ahead of
the presidential election while democratic organizations were provided a free
glide path. The credibility of the
IRS and U.S. government is at risk since the power of the IRS was apparently used against American people for
political gain. By also factoring in the Benghazi-gate scandal that played down the 9-11 terrorism attack ahead
of the election, folks are becoming disappointed that the Fall election was
manipulated. The Whitehouse is now spending all its time handling the scandals
with future legislation taking a back seat.
On Thursday, 5/16/13,
crude oil drops under 94 to 93.75 but markets show little concern over weak
commodities. Hedge funds are dumping
large amounts of AAPL stock in 2013 (no doubt the surrogates were on
television telling you to buy as they sold). Fed’s
Plosser says the Fed is not good at predicting asset bubbles, the benefits of
QE are small and the labor market is
the key metric for the Fed. JPM pressures Bloomberg to provide
details over the computer terminal
breach. RBS plans to lay off 1400
employees. WMT earnings miss on top and bottom lines
and guidance is lowered. Fed’s Rosengren urges less fiscal restraint until the
economy approves. S&P
rating agency lowers Buffet’s
Berkshire-Hathaway rating. Jobless Claims jump a
large 32K to 360K. Housing Starts drop to 853K after over one million last month.
Philly Fed is
weaker than expected continuing the ongoing
weak manufacturing theme. Futures
drop only slightly on the news, however, since bad news is good news and traders
believe the poor data and news will only lead to more QE. Traders are addicted to the QE crack
cocaine and ignore all other market parameters. The markets move flat all day with volatility creeping upwards. At about 3 PM, Fed’s Williams
(a dove) says the tapering of QE should be considered moving forward and
traders sell the market during the final 45 minutes. The 10-year
Treasury yield falls from 1.95% down to 1.88%. The broad indexes end the day near the lows. After the bell, DELL
misses on earnings but surprisingly beats on top line revenue, a rare
occurrence nowadays since many companies
are reporting lower sales. JCP reports further losses. Soros is reducing
his position in AIG.
On Friday, 5/17/13, a
large X-class solar flare erupts and
the most active sunspot the last several days is now aligning with the Earth. European
auto sales slightly improve mainly due to U.K. sales. Fiat reports weak
sales. Euro-area
construction data is weaker than expected. Today is OpEx. The shamed IRS head is grilled by politicians concerning the IRS scandal.
Bullish
traders cast away the QE tapering remarks from yesterday since the Fed will
more likely continue QE indefinitely moving forward. The S&P futures are up six. The
markets open and move higher. The dollar/yen
moves above 103+ creating the bull fuel (weaker yen due to BOJ pumping). Volatility collapses lower creating further market
upside. Consumer
Sentiment is better than expected adding rocket fuel. The broad indexes travel flat for much of the
day after the initial push higher and then at 2 PM Fed’s Kocherlakota says “the Fed has not
lowered interest rates enough” and is stating the case for more QE.
A buying frenzy occurs creating a
melt-up into the closing bell. Shorts are throwing in the towel adding more
bull fuel along with the volume push for OpEx. New
all-time highs are printed again in the Dow, SPX; Trannies, and RUT.
Nasdaq remains far below the dotcom bubble top. The SPX closes at a new all-time intraday
and closing high at 1667.47. The indexes have gone near-parabolic over the last four weeks. The Fed and BOJ central
bankers are pumping equity markets higher day after day and ‘they are the
market’. Stocks remain ovebot and signals indicate
topping action but the central bankers are overpowering market fundamentals and
technicals. For the week, the RUT is up +2.2%, SPX
+2.1%, Nasdaq +1.8% and Dow +1.6%. XLI (industrials sector) outperformed to the
upside at +2.3%. Gold drops
over 100 in the last seven days closing at 1358. The NYSE cancels trades in APC in the final minute as a mini flash
crash occurs taking the stock from the 90’s down to 20 in a heartbeat. The computer glitches and software malfunctions
in the exchanges continue to occur with regularity. The BPSPX, SPXA150R, CPC and CPCE put/call numbers, CRB Rind Index, and other
market signals indicate a significant market top is at hand but the Fed and BOJ
money printing continues to distort price discovery.
On Saturday, 5/18/13,
the U.S.
Treasury begins measures to extend the 16.4 trillion debt ceiling limit which
hits tomorrow. The government is taking in more revenue than
expected, the deficit is lower and the sequester cuts are in place, all helping
Secretary Lew to extend the Debt Ceiling
deadline to after Labor Day into September.
The can will be kicked down
the road again. The politicians are
trying to line up all the problems (debt ceiling, fiscal cliff, and CR
resolution to fund the government) for a combined 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 Monday, 5/20/13,
Chicago Fed Activity Index.
On Tuesday, 5/21/13,
…
On Wednesday, 5/22/13,
Existing Home Sales. Chairman Bernanke speaks.
Oil Inventories. FOMC Meeting
Minutes.
On Thursday, 5/23/13,
HSBC China PMI. European
PMI’s. Jobless Claims, PMI Mfg Index. FHFA House Price Index. New
Home Sales. Kansas City Fed Mfg Index. 10-Year TIPS Auction.
On Friday, 5/24/13, Durable
Goods Orders. Three-day holiday weekend ahead.
Full moon and eclipse.
--------------------------------------------------------------
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.
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, HSBC China PMI. European
PMI’s. 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, the Debt Ceiling limit is reached along with the CR
resolution to fund the U.S. government. Can the politicians reach an agreement this
summer to set the U.S. on the correct fiscal path forward to avoid these
deadlines? The summer showdown is similar to the set-up in the summer of
2011 which did not end happily for markets.
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 and likely wanting to see QE 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.
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