Keystone's Trading Week in Review and Path Ahead for Markets 6/15/13

On Friday, 6/7/13, the dollar/yen is under 97 in the 96.45-96.70 range. Japan’s pension funds are now diversifying into buying stocks which helps the Nikkei stabilize.  The 10-year yield is 2.06% well under last week’s high at 2.23%. Japan’s Abe and France’s Hollande sign a nuclear and defense technology agreement. The Turkey violence continues and is starting to worry the financial markets. German industrial production is better than expected But the Bundesbank lowers Germany’s growth forecast. The dollar/yen falls through 96 and sends S&P futures to -3.  The Monthly Jobs Report is in-line with estimates at 175K jobs and 7.6% unemployment rate. The prior month job numbers were revised lower. There is no change in hourly earnings or wages. The S&P futures jump higher to +8 and the Dow is +50.  President Obama and China President Xi meet in California where it is difficult for the president to complain about China computer hacking when it now found out that the U.S. has been spying on all American citizens for the last several years. President Obama justifies the spying on all American citizens via emails and cell phone records saying it is necessary for national security. Big Brother arrives on the scene this week in a big and alarming way.  The broad indexes explode higher as the opening bell rings. The utilities sector recovers from recent lows and volatility drops. Keystone’s SPX 60-minute charts shows price moving above the 200 EMA signaling bullish markets for the hours ahead. Keystone’s SPX 30-minute chart shows the 8 MA moving above the 34 MA signaling bullish markets for the hours ahead. Keystone’s trading algorithm, Keybot the Quant, flips to the long side at SPX 1633. The SPX ends the day up 21 points, +1.3%, to 1643. The Dow jumps 208 points, +1.4%, to 15248.  The Nasdaq is up 45 points, +1.3%, to 3469. The RUT is up 8 points, +0.8%, to 988. Note how tech and small caps lag the broad market bounce today, and, along with lackluster volume, show an uninspiring market rally. For the week, the SPX is +0.8%, Dow +0.9%, Nasdaq +0.4% and RUT +0.3%.  Again, note that tech and small caps lag (they should lead for a robust market rally).

On Saturday, 6/8/13, France’s Hollande’s approval rating falls to an all-time low. Youth unemployment in the U.S. is at the highest and longest sustained stretch of joblessness since WW II, 70 years ago. China’s import and export data show a continuing economic slowdown in Asia and globally. The Turkey demonstrations are in the ninth day where thousands have been wounded and two are dead. Turkey is key to the oil industry and oil rises 5% last week due to the turmoil.

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On Sunday, 6/9/13, China industrial production, retail sales and other data are weaker than expected. The China data dump this weekend is weak across the board indicating that a global slowdown is on tap. The President Obama and President Xi summit is a non-event overshadowed by all the Big Brother talk where U.S. citizens now realize they have been monitored for years and all their cell phone, land line, email and Internet data has been collected and archived, in direct conflict with the U.S. Constitution. Former CIA employee and NSA contractor Edward Snowden identifies himself as the whistleblower concerning the American surveillance and spying drama. Snowden is in Hong Kong concerned that the U.S. will prosecute him for warning Americans about the loss of their civil liberties and the ongoing Orwellian programs carried out by the U.S.

On Monday, 6/10/13, commodities and copper are driven lower due to the weak China data. The Nikkei recovers strongly, up 5%, to 13514. Nissan, Toyota and Honda leap from 6 to 8% higher. Japan GDP is revised upwards. The dollar/yen moves back above 98 to 98.70 reflecting the weaker yen and driving the Nikkei higher as well as U.S. futures. Turkey’s Erdogan, commenting on the drop in the stock market due to the ongoing civil unrest, says he will “choke the speculators,” and continue to crack down on “anarchists and terrorists.” S&P rating agency upgrades the U.S. debt situation to stable from negative so the S&P futures move higher. This reverses the downgrade that occurred August 2011 that precipitated the waterfall stock market crash, but the move is a head-scratcher since the financial metrics are not better, if anything, worse.    Fed’s Bullard speaks. Markets trade flat in a lackluster uneventful session.

On Tuesday, 6/11/13, the Aussie dollar drops to a 33-month low. The BOJ meets but does not announce any changes to policy. The dollar/yen drifts lower towards 98. The Nikkei drops 1.5% today with the property market hit very hard. Asian markets are weak. The Turkey situation takes a turn for the worse with riot police attacking protestors with water cannons, pepper spray and tear gas. The protestors are peaceful except for a small number throwing Molotov cocktails. Vehicles are on fire and a police man is set on fire. Rubber bullets are fired at the crowd. The Turkey markets are stable today despite the turmoil.  The Turkish economic minister blames the media for the large drop in the stock market and big up in yields. Turkey’s banks are raising deposit rates they pay to stop the flight of money out of the country. PM Erdogan makes a defiant speech in front of political leaders and shows no signs of backing down and says the riots are an ‘illegal uprising’. The German constitutional court is meeting to discuss the ECBs bond-buying plan. Schauble says he has no doubt that the ECB is acting within its mandate. The German court says the success of the ECB policy does not mean it is legal and that the ECB may be assuming it has powers it does not.  European indexes are selling off one percent or more with bond yields rising showing that there is worry over the pending German court decision and Turkey.  A France air controller strike slows travel across Europe. At 5:15 AM EST, the markets deteriorate. The dollar/yen drops through 98 then 97. European markets are now down in excess of -1.5%. S&P futures are -14 and the Dow futures are -104. Copper and commodities are weak. An analyst says C may lose as much as 7 billion dollars due to currency fluctuations. Banks are sold off today. At an AAPL conference, Phil Schiller, vice president of marketing, responds to critics that Apple is out of ideas by saying “can’t innovate anymore, my *ss.” The broad indexes sell off all day long.  In the afternoon, the business television channels are running live video of the Turkey turmoil with reporters wearing gas masks. Keystone’s SPX 30-minute chart shows the 8 MA stabbing down through the 34 MA signaling bearish markets ahead. The markets become weaker and end the day about one percent lower with tech and small caps leading the broad markets lower. The SPX finishes at 1626 and Dow at 15122. China bellwether YUM misses sales forecasts hinting at further weakness occurring in China in general.  Demonstrations begin in London protesting the upcoming G8 meeting in northern Ireland.

On Wednesday, 6/12/13, the Turkey turmoil continues with Prime Minister Erdogan agreeing to meet and listen to the protestors. Traders are under investigation for rigging Forex currency rates in a new breaking Libor-like scandal. No wonder regular folks are giving up on investing in the markets and view it all as a rigged casino—because it is. Asia is weak again overnight. Emerging markets are under pressure as Treasury yields rise. The 10-year yield is at 2.21%. The dollar/yen is 96.59.  The Spanish 10-year yield is at 4.60% at six-week highs.   A. Gary Shilling, the only person to call the 30-year plus ongoing bond rally, expects the 10-year yield to venture back under 2% and reaffirms his call for a bond rally (lower yields) with global deleveraging continuing.  George Soros says 2014 may be a tough year. JPM’s CEO Dimon pledges to fight the ongoing lawsuits from the London whale trading debacle “to the end” and says “there was no hiding, there was no lying, there was no bullsh*tting. Period.”  Sadly, CEO’s are using profanity in their statements much more frequently.  The broad indexes drop all day long. Keystone’s 60-minute chart shows the SPX dropping through the 200 EMA at 1629 signaling bearish markets ahead.  Keystone’s trading algorithm, Keybot the Quant, flips to the short side at SPX 1622. The SPX closes down 14 points to 1613. The Dow loses 27 points, dropping under 15K, to 14995. The top seller on AMZN these recent days is George Orwell’s 1984, an important novel that introduced the idea of Big Brother four decades ago, that now appears to be coming true. Business news outlets are in an uproar about economic data releases given to preferred clients ahead of everyone else. Releases such as Consumer Sentiment are given to clients two seconds ahead of the scheduled release time. This allows the preferred clients and HFT’s (high-frequency trading) robots to benefit ahead of other traders. This preferential treatment has been going on with Wall Street for decades so most traders are not surprised.

On Thursday, 6/13/13, World Bank cuts its growth forecast. The dollar/yen collapses through 95 (stronger yen) to 94.23 hinting that Abenomics is a failure. The Nikkei plunges -6.4% to 12.4K now entering a bear market (down over -20% from the top). The broader Topix dumps -4.8%. Asia is crushed in overnight trading erasing all of this year’s gains. Shanghai drops -2.8% as China data continues to weaken. RBS Bank CEO Hester steps down and plans 2000 job cuts. RBS received the largest bank bailout in the world in 2008 and remains over 80% government-owned.  The euro is 1.3329 confounding currency traders with its elevated price. Greece unemployment is now over 27% and deteriorating with teens and young folks in their 20’s now in excess of 60%! Greece unions go on strike as this troubled nation remains mired in a depression. The 10-year Treasury yield is 2.17% dropping from yesterday’s 2.24% high.  IBM cuts 1300 jobs to streamline global operations. FB chooses Sweden for the first major foreign data and server center, taking advantage of the cooler weather to chill the servers. Europe FaceBook users now surpass U.S. users.  Japan’s Kuroda attempts to calm markets saying stocks rose too far too fast. Global markets are very disjointed as a result of all the central banker intervention and interference in markets.  Retail Sales are slightly better than expected and the S&P futures recover to -3. Economic bellwether DD lowers guidance moving forward (chemicals, paints, plastics and resins are the key building blocks of all recoveries). Bank of Canada says that Europe is a major worry.  The broad indexes sell off at the opening bell with the SPX dropping under the 50-day MA at 1511 but the markets quickly recover.  Equities drift higher all day long as the dollar/yen moves higher from 94.05 to 95.10 taking equities higher. In addition, the Fed performs a large POMO pump to goose the markets higher. In the afternoon, journalist Hilsenrath with the WSJ, who many believe is a mouthpiece for the Fed, releases an article in the afternoon saying that the Fed will reassure traders that QE will continue and any rate tightening is a long way off. The broad indexes catapult higher into the closing bell with a huge intraday recovery. The BOJ and Fed central bankers control the markets and supply a market stick-save once again. Keystone’s SPX 30-minute chart shows the 8 MA rising above the 34 MA signaling bullish markets ahead.  Keystone’s SPX 60-minute chart shows the SPX back above the 200 EMA signaling bullish markets ahead. The SPX gains 24 points, +1.5%, to 1636. The Dow is up 181 points, +1.2%, to 15176. The Nasdaq is up 45 points, +1.3%, to 3445. The RUT is up 17 points, +1.8%, to 970. Small caps led which is bullish but the volume was below average. There is confirmation that Asaad has used chemical weapons against the Syrian people so the U.S. plans to provide direct military aid to the Syrian rebels escalating this regional Middle East conflict. Oil prints near one-year highs with WTIC crude oil at 97.71.

On Friday, 6/14/13, Japan and Asia markets recover on the back of a happy U.S. tape yesterday. The BOJ says more stimulus programs are coming in autumn which helps lift global equities. The dollar/yen is at 95.00. Economic bellwether rebar trades near a 9-month low due to China weakness.  European markets move higher. The Airbus A350 plane performs a successful test flight.  PPI (Producer Price Index) reports higher food and energy prices. Industrial Production remains lackluster. Economics professor Jeremy Siegel appears on television once again affirming his Dow 17,000 call for this year. The broad indexes jump higher with the SPX printing a high near 1641 but the weaker than expected Consumer Sentiment data drops the markets. In addition, the IMF is pessimistic warning of downside risks to the U.S. economy.  The dollar/yen drops like a stone down through 95 towards 94. The stronger yen slaps the equity markets lower. Keystone’s 60-minute chart shows the SPX dropping through the 200 EMA at 1629 signaling bearish markets for the hours ahead. The broad indexes are flip-flopping this week with a big down day on Wednesday, followed by a big up on Thursday and now another down day. The SPX then moves sideways through 1625-1632 and closes at the important 1626-1627 S/R. The SPX loses -0.6% today, the Dow is down -0.7%, Nasdaq -0.6% and RUT -0.8%; small caps leading the way lower. Volume was light. For the week, the SPX closes at 1627 losing -1.0%, the Dow is 15070 losing -1.2%, Nasdaq at 3424 losing -1.3% and RUT at 981 losing -0.6%. Tech led the broad market lower while traders maintain faith in small caps. Stocks are down three of the last four weeks.

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On Monday, 6/17/13, Empire State Mfg Survey.

On Tuesday, 6/18/13, Japan economic data. FOMC Meeting begins.  CPI (Consumer Price Index). Housing Starts.

On Wednesday, 6/19/13, FOMC Meeting Announcement, Forecasts and Chairman Bernanke’s Press Conference. Oil Inventories.  FDX earnings.

On Thursday, 6/20/13, Jobless Claims. Asia Flash PMI’s. Europe Flash PMI’s. Existing Home Sales. Leading Indicators. Philly Fed Survey. Natty Gas Inventories. 30-Year TIPS Auction.

On Friday, 6/21/13, OpEx Quadruple Witching.

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On Monday, 6/24/13, Chicago Fed National Activity Index. Dallas Fed Mfg Index.

On Tuesday, 6/25/13, Durable Goods Orders. New Home Sales. Consumer Confidence. Richmond Fed Mfg Index. 2-Year Note Auction.

On Wednesday, 6/26/13, GDP. Oil Inventories. 5-Year Note Auction.

On Thursday, 6/27/13, Jobless Claims. Personal Income and Outlays. Natty Gas Inventories. Kansas City Mfg Index. 7-Year Note Auction. Farm Prices 3 PM.

On Friday, 6/28/13, EOM.  Chicago PMI. Consumer Sentiment.

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On Monday, 7/1/13, Asia PMI’s.  Europe PMI’s. Construction Spending. ISM Mfg Index.

On Tuesday, 7/2/13, Factory Orders.

On Wednesday, 7/3/13, ECB Rate Decision and Press Conference. ADP Job Report. International Trade. ISM Non-Mfg Index. Natty Gas Inventories. Oil Inventories. Markets Close Early for Holiday.

On Thursday, 7/4/13, U.S. Markets are Closed in Observance of July 4^th Independence Day.

On Friday, 7/5/13, Jobless Claims. Monthly Jobs Report.

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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. The Whitehouse scandals may distract the politicians from properly addressing the countries financial problems.

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.