On Friday, 1/18/13, China GDP is 7.9% reversing the seven-quarter down trend.
Oil, copper and commodities markets move higher on the news as well
as the Aussie miners. U.K. retail sales are much weaker than expected.
OpEx today. GE,
a global bellwether, beats on earnings. GE’s
CEO Immelt is providing the president business advice daily, and likely washing
his car each weekend, which results in lucrative government contracts. MS also beats so the bulls are further
encouraged. CAT receives an upgrade, no
doubt due to positive China GDP, which now sets the long traders on an
unstoppable path higher. Consumer Sentiment is
71.3, the lowest reading since December 2011, but all bad news is ignored now
in the markets, the sound of the negative sentiment data is muffled due to all
the popping champagne corks on the trading floor. A late-day melt-up occurs into the close
where the SPX prints new 2013 and multi-year
highs at 1485.98. The RUT and
Trannies (TRAN) are at historic highs. Strong transportation stocks
and small caps are a very bullish indicator. The volume picked up strongly on Thursday and
Friday as well, another feather for the bulls cap. A three-day holiday weekend begins. The SPX is up one percent this week. AAPL drops 4% this week closing at 500,
but the broad indexes move higher anyway. Late Friday night, under the maximum cover of
darkness, CAT releases news of accounting misconduct at its China operations.
Part of Friday’s market rally was due to the upgrade of CAT in the
morning and rosie talk about blue skies ahead.
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On Sunday, 1/20/13, BOJ meeting begins to decide on the stimulus path
forward. The global currency
wars are underway. Merkel loses a portion of her
power base in the Lower Saxony elections. Europe
is hit with serious winter weather affecting travel and business. Ditto across the northern U.S. Natty
gas continues to receive a bid.
On Monday, 1/21/13, U.S. Markets are Closed in Observance of Dr. Martin
Luther King Day. The Presidential Inauguration takes place
in chilly Washington, D.C.
On Tuesday, 1/22/13, U.S. Markets Open for Trading. The BOJ disappoints
targeting an inflation rate of 0.4% this year, 0.9% in 2014 and 2% in the long
run. The BOJ
central bank and Japan government officials appear together for photo-ops
signaling a united front to weaken the yen moving forward. The yen weakening measures may proceed a bit
slower than anticipated. Trader’s were all bulled up on the dollar/yen which drops on the news
(stronger yen). The new Japan path,
to try and escape two decades of deflation, is dubbed ‘Abenomics’, an open-ended monetary easing policy moving forward. On
earnings, DD beats, VZ misses. CAT is hit on the negative news released Friday
night. The 787 Dreamliner bucket ’o bolts remains on the ground since engineers
are having trouble figuring out the battery problem. BA is sold off. Markets
move sideways after the opening bell. On Bloomberg television, David Tepper of
Apaloosa Management is a raging bull saying buy with both hands. In
Fall 2010, after the QE2 money pump was announced by Chairman Bernanke in
August 2010, the markets were continuing to chop along not fully convinced of
the power of the money printing. Tepper, a well-respected hedge fund manager,
appeared on television back then and said ‘do
not fight the Fed’, buy with both hands, and the obscene money printing
will create a huge rally, get in while you can. After that, to finish 2010 and move into 2011 the broad
indexes catapulted higher and the market move was dubbed the ‘Tepper Rally’.
Therefore, traders listen when Tepper talks and the markets are responding
today. Everything is blue skies and
champagne for the bulls. Existing Home Sales
disappoint since less house inventory is available for sale. Foreclosures are tied
up in bank paperwork. The low inventory
will increase house prices which is not good for a floundering housing
market and may create a flame out in the housing sector. Slow steady growth is needed not a jack-rabbit
recovery that dies. Markets ignore bad news and finish higher on the day with the Dow Industrials now taking out all
intraday highs going back to five years ago. The Dow, SPX, RUT, Trannies and mid-cap
indexes are all now at five-year or all-time highs.
On Wednesday,
1/23/13, U.K’s Cameron announces intent to hold a
referendum vote, up or down, on whether or not to stay in the euro.
The vote would not take place until a few years in the future. Cameron said he does not want to leave the
euro but he would support the referendum vote to occur. The futures and other markets drop on the
news, the euro falls under 1.33, but
recovers. The IMF lowers growth forecasts which is becoming
a regular occurrence. COH (high-end retail bags) disappoints with earnings and
is pummeled over 16%. MCD beats on earnings and provides slight lift to the Dow
Industrials. The markets begin the day flat but the 10 to 11 AM Fed money pump occurs as it does every day, and the broad
indexes float higher testing the strong
SPX 1496 resistance. Markets are simply pumped higher on easy money and not
fundamentals or earnings. The House approves the vote to shamefully kick the can
down the road with the debt ceiling
limit now pushed to mid-May. The political Kabuki Theatre is an embarrassing
display of incompetence in Washington and very harmful to the U.S. moving
forward. Markets float upwards on the vote but had most
of this move already priced in. Traders
are fully convinced that politicians will continue with the can-kicking and are
not pricing in any market downside for the political theatrics upcoming. The SPX fills the
last remaining gap from the 2007 highs so price no longer has a reason
to move higher based on gap fills alone. The SPX closes at new five-year highs day
after day. After the bell,
the much-awaited AAPL earnings are disappointing. The iPhones, iPads and Mac’s all fell short of sales goals. The bottom line EPS
beat but the top line revenue was
shy. Apple also said that their guidance
forward would target their actual expected numbers in the future, not the
game from the last decade where they
sandbag lower and then blowout the numbers each quarter to the upside. This
means the guidance just provided is even
less optimistic moving forward. Also of interest is that the consumers are buying the less expensive products
which are cannibalizing the more expensive devices (iPad Mini’s instead of
an iPad and iPhone 4 and 4s instead of 5). Apple plummets 10% to the 460’s in the AH’s trading and the Nasdaq futures
dive as well. AAPL makes up about 3 to 5% of the SPX and about 18 to 20% of
the Nasdaq. Last year, the blowout Apple earnings catapulted the markets higher
for the large springtime rally, this year, an earnings miss. On the plus side,
NFLX reports blowout earnings and its stock jumps 30% higher AH’s.
On Thursday, 1/24/13,
the disappointing Apple news is a wet blanket
on global markets. China Flash PMI shows another improvement in
manufacturing expanding to a two-year high. Surprisingly, the copper
and commodities markets are unenthusiastic.
The France
PMI drops signaling continuing manufacturing woes in a high-tax environment. Germany, however, improved
slightly. North Korea rattles
a saber overnight threatening to conduct a nuke test. The World Economic Forum in Davos, Switzerland, continues. Jobless Claims surprisingly drop for
another week to a five-year low which hints that a sustainable recovery may be
in place. Leading Indicators are
stronger than expected. AAPL drops 10% to 450 at the opening bell. The SPX and Dow Industrials, however, move
higher and at 10:05 AM EST, the SPX punches up thru 1500, the first time in five years.
The utilities are moving higher
which are helping to elevate the
markets. Ditto oil, copper and
commodities. The broad indexes continue higher all day long with the SPX now up six
days in a row. After the bell MSFT earnings beat.
On Friday, 1/25/13,
the European
banks handily meet LTRO requirements and refunding creating market
optimism. German
sentiment is better than expected. Draghi is interviewed in the morning and
says 2012 was the rebirth of the euro. The euro rallies higher, now well over 1.34, which sends futures markets
higher. The European debt crisis
remains under the surface but the perception that things are improving is
calming the markets. PG and KMB earnings beat. New Home Sales disappoint with lower than
expected numbers but the prior month revisions are higher. The 10-year yield
hits 1.95% with money moving out of bonds into stocks. CAT
and JOY, two China bellwethers sell off strongly. Copper, oil and commodities move lower. Perhaps
all is not as well in China as thought? The markets continue to ignore any bad news and move higher into the afternoon from the 10-11 AM free money pump that
occurs each day. AAPL continues to drop
falling under 440 intraday. XOM overtakes
Apple as the largest market cap stock reclaiming the top spot. The
tried and true old school company (Exxon) retakes the flashy company (Apple)
after the sizzle flames out. The SPX is up eight days in a row, a pace not matched for five
years. The SPX closes
above 1500, a key psychological level, and now the focus is on new
all-time highs. For the week, the SPX is up 1.1% to 1503. The Dow
Industrials are up 1.8% this week to 13896. The RUT is up 1.4% to 905 and the Nasdaq
is up a paltry 0.5% to 3150 on the week. Note how the small caps and tech are not showing strong leadership. Apple
continues to sell off AH’s.
On Saturday, 1/26/13,
violence escalates in Egypt on the two
year anniversary of the initial demonstrations.
Seven people are killed. Geopolitical
risk is not priced into the markets.
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On Monday, 1/28/13, a
huge economic data and earnings week is ahead. Durable Goods. Pending Home
Sales. CAT-China proxy. YHOO-tech.
On Tuesday, 1/29/13,
Case-Shiller Home Price Index. FOMC meeting begins.
Consumer Confidence. PFE-pharma.
On Wednesday,
1/30/13, GDP. ADP Jobs Report. FOMC Rate Decision. BA-airplanes. FB-social.
On Thursday, 1/31/13,
EOM.
Jobless Claims. Personal Income and Outlays. Chicago PMI. MO-cigs. MA-credit
cards. UPS-shipping.
On Friday, 2/1/13, Monthly Jobs Report. PMI Mfg Index. Consumer Sentiment. ISM Mfg Index. Construction Spending. MRK-pharma. XOM-big
oil.
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On Monday, 2/4/13, Factory
Orders.
On Tuesday, 2/5/13,
ISM Non-Mfg Index.
On Wednesday, 2/6/13,
Oil Inventories.
On Thursday, 2/7/13, Jobless
Claims. Productivity and Costs.
On Friday, 2/8/13,
International Trade. Wholesale Trade.
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On Tuesday, 2/12/13, President
Obama’s State of the Union address.
On Wednesday,
2/13/13, Retail Sales. Business Inventories.
On Friday, 2/15/13,
Industrial Production. Consumer Sentiment.
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In February, Italy elections.
In February or March, the National People’s Congress convenes. China President Xi Jinping and Premier Li Keqiang take
over complete control and the ten-year
transition of power is finished. China now sets inflation and budget targets moving
forward. China will push to a
domestic-led economy, private consumption, rather than an export-led economy, but a domestic economy will grow
at a slower pace. The GDP projections
are of particular interest, 2012 grew at
an average 7.8% rate.
On Friday, 3/1/13,
the Sequestration hits with one
trillion in automatic spending cuts for government.
On Wednesday,
3/27/13, the Continuing Resolution (CR) is required to fund the government.
In March and April,
the BOJ head’s will be replaced so stronger QE will
continue. Perhaps a low in the Nikkei in January or February may
provide an attractive entry for a long trade once the money-printing begins
(weaker yen) in earnest.
On Sunday, 5/19/13,
the 16.4
trillion Debt Ceiling hits.
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.
