Keystone's Trading Week in Review and Path Ahead for Markets 8/10/13

On  Friday, 8/2/13, gold drops under 1300. Debt-to-GDP ratio’s continue to increase around the world, non-stop higher year after year, despite the rosy stock markets, indicating that further global deleveraging is likely required moving forward. CVX misses on earnings. The consensus for the Monthly Jobs Report is 183K, but 200K is expected due to the ADP Report, with a slight downtick in the unemployment rate from 7.6% to 7.5%.  At the CME, Treasury futures stop trading for 5 seconds just before the Jobs number is released at 8:30 AM. Circuit breakers kick in as a large buyer enters the market likely via HFT (the trade was on the correct side so obviously the jobs number was known ahead of time with two sets of rules occurring at the Wall Street casino, one for the insiders who receive data releases ahead of time, and one for everyone else). The Jobs numbers miss at 162K jobs well under the 200K expected. In addition, the May and June jobs numbers are reduced, but, the broad indexes already enjoyed upside off that prior happiness. The labor participation rate drops again as folks give up on finding a job. The unemployment rate drops to 7.4% (lowest in 4 ½ years) from 7.6%. The average hourly earnings are down one-tenth percent. Wage deflation means that overall inflation does not exist. Obamacare is causing an increase in part-time jobs as companies seek to avoid the higher costs of the new law.  Sequester furloughs create weak job numbers and many jobs created lately are of low quality.  One-third of the jobs created in the last few weeks are in the retail, food and restaurant areas. 77% of the jobs created this year are part-time jobs.  One in every three young people are living at home with their parents, mainly due to the structural employment problem growing in the U.S. The 10-year yield collapses on the news from 2.74%, on the verge of breaking out to the upside, down to 2.61%, a huge 13 basis point drop in a heartbeat. The dollar weakens. Futures drift flat to lower. The markets sell off slightly at the opening bell. Copper is strong today and gold rebounds as traders think the Fed will continue QE forever with the weak job news. European stocks close at 2-month highs. The markets are weak but volatility is crushed lower and Fed’s Bullard pumps the QE talk so equities recover. Copper weakens as the day continues but the bulls run into the closing bell creating a new all-time closing high and intraday high for the SPX at 1709.67. The Dow closes at a new all-time high at 15658.36 and new all-time intraday high at 15658.68. The Nasdaq prints a new 13-year closing and intraday high at 3689.59. The RUT does not print new all-time highs. For the week, tech is the big winner with traders tripping over themselves to buy the Nasdaq up 2.1%. The Dow Transports are up+2.8% this week which is positive for markets from a Dow Theory perspective. The SPX and RUT are up 1.1% on the week and the Dow is the laggard up +0.6%.  The Dividend Stock Bubble is at a new peak as evidenced by SDY and DVY.  The favorite gold ETF of investors, GLD, continues to print at 3-year lows. After the close, BRKA and BRKB earnings beat so Berkshire (Warren Buffett) stock rises.  Ralph Acampora, a notable technical analyst, says to buy the stock market now with both hands. The SEC brings insider trading charges against a former GMCR employee and a cohort. S&P cuts the RSH rating so the stock is sold off.

On Saturday, 8/3/13, 21 U.S. embassies in 12 Muslim nations are closed due to a terrorism threat that is supposed to occur tomorrow (President Obama’s birthday and the swearing-in of the new Iranian leader); looks like the terrorists win.  Perhaps the focus should be on properly protecting the embassies instead?  A travel warning is issued for all Americans in Northern Africa and Middle East. Sunday is a work day in these nations. Violence typically increases after Ramadan. Egypt violence continues as the army contemplates encircling Morsi-supporter encampments to disperse the crowds. In the afternoon, the U.K., France and Germany decide to close their Yemen embassies.  The First Community Bank of Southwest Florida is raided and shut down by the Fed’s, the seventeenth bank failure this year. The Indian embassy in Jalalabad is attacked by a suicide bomber that kills nine people, six are children. The Benghazi scandal grows as it comes to light that dozens of CIA operatives were on the ground during the attack and it may have been an arms deal gone bad where weapons in Libya were supposed to be acquired and then shipped to Syria rebels via Turkey. The Whitehouse appears to be prohibiting the Benghazi survivors from talking to the press and are changing the names of witnesses so they cannot be tracked and asked questions. For the IRS scandal, the House subpoenas Treasury Secretary Lew for IRS documents since Whitehouse officials appear to be obstructing the investigation.

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On Sunday, 8/4/13, the terrorism chatter on communication lines is at the highest level in years. The embassy closings are now extended to next weekend, 8/10/13.  Fonterra, a major New Zealand milk products supplier and largest dairy exporter in the world, pulls powdered milk products, and China stops the import of these products, due to contamination.

On Monday, 8/5/13, the Aussie dollar is at a 3-year low. China and Europe PMI services data are slightly better than expected with the U.K. far better, now above 60, so the FTSE Index outperforms. Congress adjourns for August recess ignoring the fiscal problems until after Labor Day. The Whitehouse reverses a Samsung-Apple verdict handed down by the U.S. top trade court; the first time in 20 years that such a reversal move occurs signaling to the tech sector that the non-stop patent litigation must end. There are record inflows into stocks in July, 40 billion dollars worth, showing that Ma, Pa, and Joe Sixpack are showing up to hold the bag.   Today is the 2-year anniversary of the S&P downgrade of U.S. debt that led into the August 2011 crash. TSN earnings beat estimates so folks are eating a lot of chicken. QCOM (chips) is downgraded due to lower Smartphone demand moving forward. The broad indexes begin the day on the weak side. Copper and commodities are lower. New response rules are brought on line for the exchanges to help prevent future flash crashes. The ISM Non-Mfg Index is 56.0 well above the 52.2 last month.  The broad indexes move sideways all day long and finish flat. David Tepper, Appaloosa Management, known for his continuing correct market calls based on the Fed easy money spigot flowing, says equities can still head higher. Tepper’s calls typically result in market rallies the next day. The bulls continue to pump the markets including Tepper, Ralph Acampora and Jeremy Siegel, all telling investors to buy the markets at SPX 1710. The radioactive water leaking from the Fukishima plant creates an emergency after breaching a barrier. 300 tons of contaminated water is flowing into the Pacific Ocean each day.  Many Japanese are concerned about restarting the nuke plants when the Fukishima disaster is far from over.

On Tuesday, 8/6/13, RBA cuts the rate to 2.5% which was expected as evidenced by the recent weakness in the Aussie dollar.  Dollar/yen 98.10. Italy GDP is slightly better than consensus but remains in contraction for 8 consecutive quarters. U.K. industrial output increases.  German manufacturing orders are up. The dollar is down so oil and copper are up. The 10-year yield is 2.66%. On the terrorism front, the communications prompting the closing of embassies was Ayman al-Zawahri, the leader of Al Qaeda, telling Nasser al-Wuhayshi, the leader of the Yemen terrorism branch, to carry out a planned attack. The one thing no one mentions is that these two terrorists are aware of all the NSA spying drama in the news and could simply be playing the U.S. with a fake communication, sitting idly by and watching America run around like chickens with their heads cut off. The days ahead will tell the story since the act is supposed to occur as Ramadan ends which is now.  GM cuts the price of the Volt electric car by 13%. KORS show robust spending in retail for accessories, bags, belts, jewelry, etc…  However, the teen retailers receive downgrades and are sold off.  Equities drop at the opening bell and then move flat across SPX 1693-1699 into the close. At 1:45 PM EST, the BATS BZX exchange is not accepting orders due to system issues and Nasdaq is routing orders away from BATS. The frequency of ‘computer glitches’ continue to increase. BATS handles about 20% of the overall trading volume in markets.  After the bell, DIS beats on EPS but misses on top line revenue and moves higher in AH’s trading. Companies continue to report lackluster top line sales. Folks cannot buy things if they do not have jobs. The DOJ (Department of Justice) brings a suit against BAC concerning defarauding investors with bad mortgage paper in 2008 and the stock drops -1.1% today. Perhaps the bloated financial sector will finally roll over moving forward? IBM is down -2.5% today.

On Wednesday, 8/7/13, the yen strengthens with the dollar/yen pair dropping through 97 down to 96.75. The stronger yen crushes the Nikkei -4% overnight.  Ramadan ends.  Bank of England offers forward guidance targeting a 7% unemployment rate taking a page directly out of the Fed’s playbook. Central bankers are using the Fed’s path as a guide now saying that ‘green shoots’ are appearing for the European economy. The broad indexes drop like a stone at the opening bell with the SPX printing a LOD at 1685 but markets recover from 10:30 AM on, due to the Fed POMO pumps as usual, and closes at 1691. The Fed members appear to be reinforcing the tapering theme for QE moving forward which stalls the markets. The Fed and central bankers are the market. After the bell, TSLA beats on earnings and the stock jumps over 10%. 

On Thursday, 8/8/13, BOJ maintains current policy with no changes. Dollar/yen is 96.25 dropping almost 4% in only a few days time. Kuroda urges fiscal discipline. China trade data hints that the economy is stabilizing with a slightly higher demand for raw materials which sends copper higher. The Nikkei and Shanghai Indexes close down over 1%. Nestle’s reports the slowest sales growth in four years. Commerzbank Bank reports weak earnings but the stock jumps strongly higher since a restructuring plan will fire 1 in every 4 management positions. Euro is 1.3348. Greece unemployment rate is 27.6% continuing along at depression levels. The dollar is crushed today which sends copper and commodities higher and U.S. futures higher. The 10-year yield is 2.59%. JPM faces criminal and civil probes on mortgage illegalities but charges are not filed as yet. The Justice Department is targeting banks and especially those involved with payday loans. TSLA is up +14% pre-market. ARO warns on earnings and is sold off -5% pre-market. Retail data is very weak with slow back-to-school sales and folks buying supplies at low-end retailers such as WMT and DG. The broad indexes jump higher at the open based on China and European optimism with the SPX at 1700 again.  GRPN leaps +24%. Solar stocks are beaten. Equities top out in the opening minutes and collapse. The SPX drops to 1688 but the Fed’s POMO pumps kick in at 10:30 AM to send the broad indexes higher and finish up on the day.  The 30-Year Bond Auction is weak with the yield at 3.67%.  USNA stock flash crashes at 1 PM dropping from 81 to 73, about -10%, in a heartbeat. The move affects other multi-level marketing stocks such as HLF and NUS but all stocks quickly recover. The computer glitches and mini flash crashes continue to occur in the exchanges with frequency. Be careful of using stop losses since they will be triggered and create a loss in a position that actually recovers quickly, once again hurting Ma and Pa Sixpack. After the bell, PCLN beats on earnings and jumps higher in the AH’s.  Ackman pressures JCP to find a new CEO in an internal letter released to the public. Tom Lee, JPM’s top strategist, says to buy equities with both hands. Marc Faber, Dr. Doom, says a 1987-style crash is possible. Thus, Tepper, Acampora, Siegel and Lee are all raging bulls telling Ma and Pa to buy the market while Faber says sell the market.

On Friday, 8/9/13, China economic data meets or beats expectations, however, robust automobile sales are actually due to heavy discounting.  AAPL iPhone sales are lagging in China. Greek youth unemployment is 65%.  The broad indexes sell off at the opening bell but maintain a flat posture as the day plays out.  Semiconductors are causing equity weakness. The VIX moves back above 13. The Eiffel Tower (France) is evacuated due to a bomb threat but it was a hoax. SAC Capital is allowed to continue operating while the legal problems continue. Courts and regulators make this decision since SAC adds a lot of liquidity to markets daily and that will have a negative impact on markets if the company is shut down; the markets are very incestuous. President Obama conducts a press conference since Jay Leno the comedian asked why there are no press conferences anymore. The president says his relationship with Putin is fine and then slams the Russian leader describing his body language as a bored kid in the back of the room. The president says Snowden is not a patriot although half of the country disagrees. Snowden’s action has caused the president to now reassess the NSA spying on America program but the cat is already out of the bag. Everything you do electronically, cell phone conversations, emails, instant messages, photographs, Internet usage, etc… is all monitored and archived, just like George Orwell (1984) predicted decades ago. Equities finish flat to down on the day.  For the week, the SPX loses -1.1% to 1691, the Dow is off -1.5% to 15426 (ending a 6-week winning streak), the Nasdaq loses -0.8% to 3660 and the RUT is down -1.1% to 1048.

On Saturday, 8/10/13, Egypt violence continues. Ditto Syria. A terrorism event does not occur over the last week as was threatened. China is investigating Sanofi, the French drug maker, on bribery charges. The protectionism behavior between nations continues.

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On Monday, 8/12/13, Treasury Budget.

On Tuesday, 8/13/13, Retail Sales. Import and Export Prices. Business Inventories.

On Wednesday, 8/14/13, PPI. Oil Inventories.

On Thursday, 8/15/13, CPI. Jobless Claims. Industrial Production. Natty Gas Inventories.

On Friday, 8/16/13, Opex. Housing Starts. Productivity and Costs. Consumer Sentiment.

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On Monday, 8/19/13, ….

On Tuesday, 8/20/13, …

On Wednesday, 8/21/13, Existing Home Sales. Oil Inventories. FOMC Minutes.

On Thursday, 8/22/13, PMI Manufacturing Indexes. Jobless Claims. Natty Gas Inventories.

On Friday, 8/23/13, New Home Sales.

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On Monday, 8/26/13, Durable Goods.

On Tuesday, 8/27/13, Consumer Confidence. 2-Year Note Auction.

On Wednesday, 8/28/13, Oil Inventories. 5-Year Note Auction.

On Thursday, 8/29/13, Jackson Hole Economic Summit begins with a focus on Yellen. Jobless Claims. GDP. Natty Gas Inventories.

On Friday, 8/30/13, EOM. Chicago PMI. Consumer Sentiment.

On Saturday, 8/31/13, Jackson Hole Summit ends.

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On Monday, 9/2/13, Markets are Closed in Observance of Labor Day. China and Asia PMI’s.  European PMI’s.

On Tuesday, 9/3/13, Markets Reopen for trading. Congress returns from August recess to address the fiscal problems within the next 4 weeks. ISM Mfg Index.

On Wednesday, 9/4/13, Beige Book.

On Thursday, 9/5/13, Jobless Claims. Factory Orders. Natty Gas Inventories. Oil Inventories.

On Friday, 9/6/13, Monthly Jobs Report.

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On Monday, 9/9/13, …

On Tuesday, 9/10/13, …

On Wednesday, 9/11/13, Anniversary of 911. Wholesale Trade. Oil Inventories. 10-Year Note Auction.

On Thursday, 9/12/13, Jobless Claims. Natty Gas Inventories. 30-Year Bond Auction.

On Friday, 9/13/13, PPI. Retail Sales. Consumer Sentiment. Business Inventories.

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On Monday, 9/16/13, Industrial Production.

On Tuesday, 9/17/13, FOMC meeting begins as traders listen for ‘QE taper’. CPI.

On Wednesday, 9/18/13, Housing Starts. Oil Inventories. FOMC Meeting Announcement, Forecasts and Chairman Bernanke Press Conference.

On Thursday, 9/19/13, Jobless Claims. Philly Fed. Leading Indicators. Existing Home Sales. Natty Gas Inventories.

On Friday, 9/20/13, OpEx Quadruple Witching.

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On Sunday, 9/22/13, Germany reelects Merkel and now there is no longer a need to keep countries like Greece or Cyprus in the euro, or even Germany itself.

On Monday, 9/23/13, Flash PMI’s.

On Tuesday, 9/24/13, Consumer Confidence. 2-Year Note Auction.

On Wednesday, 9/25/13, Durable Goods Orders. New Home Sales. Oil Inventories. 5-Year Note Auction.

On Thursday, 9/26/13, Jobless Claims. GDP. Natty Gas Inventories.

On Friday, 9/27/13, Consumer Sentiment.

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On Sunday, 9/29/13, the Debt Ceiling Limit and CR Continuing Resolution to fund the U.S. government deadlines occur. Perhaps last minute antics occur today which is typical for the politicians. The Whitehouse scandals are distracting politicians from addressing the fiscal problems.

On Monday, 9/30/13, EOM. EOQ3.

On Tuesday, 10/1/13, Q4 begins. China and Asia PMI’s.  European PMI’s. Construction Spending. ISM Mfg Index.

On Wednesday, 10/2/13, ADP Jobs Report. Oil Inventories.

On Thursday, 10/3/13, Jobless Claims. Factory Orders. Natty Gas Inventories.

On Friday, 10/4/13, Monthly Jobs Report. European bank stress tests will occur in Q4.

----------------------------- 2014 ----------------------

On Friday, 1/31/14, Chairman Bernanke’s term ends at the Fed. Yellen, Summers and Kohn are candidates. Yellen is the front runner, very dovish and will likely continue QE indefinitely which is happy news for stock market bulls.

On Friday, 2/7/14, Winter Olympics begin in Sochi, Russia, through 2/23/14.

In February/March 2014, the new Fed Head testifies before Congress.

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.