Saturday, September 7, 2013

Keystone's Trading Week in Review and Path Ahead 9/7/13

On Friday, 8/30/13, today is the EOM and August will print as a down month. France says all options are on the table including an imminent strike on Syria reaffirming support to the U.S. Turkey would like to see an extensive strike to dethrone Asaad (since they are turning more Islamist). Arab nations, such as the Suadi’s, want the U.S. to take action, but they will never say that publicly, instead they denounce any U.S. involvement. The Middle East is a mess. Neither side in the Syria civil war is friendly towards the U.S. and 50% of Americans are opposed to military action in Syria. Since the U.K. Parliament voted to not take action, oil prices continue falling with WTIC crude under 108 and Brent oil under 115. Gold drops under 1400. Copper is weak for a second day. Global PC shipments continue falling and should drop -10% this year. The markets stumble along sideways today with large point moves up and down due to the higher volatility. VIX is now above 17. The SPX is down -1.8% this week. The Dow loses -1.3, Nasdaq drops -1.9% and RUT a huge -2.6%. Trannies dump -3.6% this week as oil rises. Berlesconi repeats the message that his expulsion will wreak havoc for Italy’s government but softened his tone saying his statements are not an ultimatum.

On Saturday, 8/31/13, President Obama says he will wait for Congressional approval before taking action in Syria. This delays any action until 9/9/13 or later (unless it is a fake-out move). The president says he will act regardless of how Congress votes which creates confusion. He speaks of urgency to act, but does not call Congress back immediately (Cameron called the British Parliament back for a vote) and instead goes golfing. President Putin (Russia) says he would like to see the evidence of chemical weapons use in Syria. Oil prices will likely drop on the news and equities should rally.


On Sunday, 9/1/13, Syria’s government-controlled newspaper says that the ‘U.S. delay is the start of the historic American retreat’.  President Obama’s actions are viewed as weak and indecisive across the Middle East. Secretary Kerry, on Meet the Press political talk show, says the chemical testing has confirmed the use of nerve agent Sarin. The U.S. maintains five destroyer battle ships off the coast of Syria as well as an amphibious assault ship. There are 2,000 United States Marines available to carry out any mission at a moment’s notice. The evening futures open up strongly due to the U.S. delaying any action in Syria with the S&P 500 at +10. Oil drops with WTIC briefly falling under 106. Brent is 112.33. Copper catapults higher. India has the slowest growth in 3 years.

On Monday, 9/2/13, India PMI contracts for first time in 3-1/2 year but the Sensex Index moves higher +1.5%. China PMI manufacturing is flat at 50.1, a hair on the expansion side, meeting expectations, but emerging markets remain weak. Everbright Securities, the state-owned brokerage that caused the erratic behavior in the Shanghai Index on 8/19/13, is halted in China trading. Asian markets trade higher.  S&P futures are +15. Dow +110.  Nasdaq +32. Copper is up +2%. U.S. Markets are Closed in Observance of Labor Day. U.K. Manufacturing data is the best in 2-1/2 years. Russia says a U.S. strike on Syria would delay a peace conference for a very long time if not forever. European markets are all up over +1.5% on PMI’s meeting or beating expectations.

On Tuesday, 9/3/13, RBA keeps rates on hold, maintaining a neutral stance in front of the election on 9/7/13. The Aussie dollar moves higher. The Japanese government will take the lead over handling the Fukishima leaks and radioactive water. Nikkei is up +3%. Dollar/yen 99.61 moving towards 100 again. European markets are flat. U.K. construction data is the best in 6 years. German 10-year bund yield is 1.92%. Euro 1.3176 at a one-month low. MSFT announces a deal to buy NOK Smartphone division. NOK stock jumps +40%. U.S. futures are up big; S&P +17, Dow +126 and Nasdaq +35.  The 10-year yield moves higher to 2.84%. WTIC oil 107.  Brent 114.50.  Futures drop dramatically at 4:52 AM EST when a Russian news agency reports that the firing of two ballistic missiles was detected in the eastern Mediterranean Sea. S&P’s drop to +11.  Dow +80. Nasdaq +20Oil and gold jump higher. Strong copper leads the markets higher. The 10-year yield is 2.82%. There is skepticism about the news as the minutes tick by. Israel says they have detected nothing but a short time later admit they launched a test missile.  The Syria event dampens the market mood but equities reopen after the Labor Day holiday and jump higher with the SPX moving from 1633 to 1651. At 10 AM, the ISM Mfg data is much stronger than expected so in this perverse market, stocks leak lower since good news is bad news. Traders want the Fed’s QE crack cocaine easy money but better data means tapering will come sooner rather than later. Congress returns from recess to address the fiscal problems within the next 4 weeks and vote on action against Syria. Congress holds hearings on Syria and there are disruptions by attendees protesting against another war.  At 11:41 AM, Speaker Boehner says he will support military action in Syria, so will Representative Cantor, and others, so the leadership is falling in line behind the president in favor of striking Syria. Oil jumps higher with WTIC over 108. Gold jumps above 1400. Equities collapse with the SPX dropping form 1651 to 1634 in three hours time. The broad indexes end the day about one-half percent higher but well off the bullish highs after the opening bell. The SPX closes under the 100-day MA at 1639.88. S&P rating agency says the DOJ lawsuit is in retaliation for S&P downgrading U.S. debt two years ago. President Obama flies to Sweden before attending the G20 meetings.

On Wednesday, 9/4/13, Putin says he will support a strike on Syria if there is convincing evidence of chemical weapon use. An earthquake occurs in Japan adding to their troubles. Ryanair unexpectedly misses on earnings and is punished -14%. All European airlines drop on the news since folks have less money to travel. Copper is down almost -2% in early trading. Navistar, the truck maker, repots a loss and will cut 500 jobs. If the shipping sector is weak, so is the economy.  President Obama speaks from Sweden surprising everyone by saying the world set the red line on Syria chemical weapons, not him. Gold and oil drop as the president talks interpreting his words as more dovish on Syria. DG beats on earnings and pops +4% so folks are seeking out ways to save money by shopping at lower end stores.  The broad indexes move higher into lunch time with the SPX jumping from 1638 to 1655.  The Nasdaq experiences another computer glitch outage for 6 minutes from 11:35 AM to 11:41 AM and says a limited amount of stocks were affected. NYSE Arca says the outage was 9 minutes and affected all Tape C (Nasdaq) stocks. Nasdaq later blames the outage on a server failure. The computer glitches and mini flash crashes continue occurring with frequency.  Semiconductors explode to the upside today +2.6% led by INTC. Retail and financials catch a bid as well but copper remains weak. The Beige Book is a yawner.  The day ends with the SPX gaining +0.8%, Dow +0.7%, Nasdaq +1.0% and RUT +0.9%. September begins on an up note.  Samsung unveils a Smart watch. The Senate Foreign Relations Committee votes to approve a Syria strike. This hints that the Senate may vote to approve the use of force, backing the president, although the House is leaning to a vote against a strike on Syria. Rosh Hashanah begins.

On Thursday, 9/5/13, Indian Sensex is up strongly. BOJ maintains steady monetary policy and says the economy is recovering. The dollar/yen moves above 100 and then pulls back to 99.90. President Obama lands in Russia for the G20. Jumbo mortgage rates fall below conventional rates. The 10-year yield climbs to 2.94% and yields around the world drift higher. The U.S. 2-10 yield spread is 246 points. German factory orders drop more than expected. BOE maintains the benchmark rate at 0.50%. ECB leaves rates unchanged. Draghi says he is ‘very, very cautious about the recovery’. Copper is up in the overnight session but turns negative one hour before the U.S. equity markets open. ADP Jobs Reports is 176K jobs in line with the recent trend. This data now helps estimate Friday’s Job Report to be about 180K-200K jobs. The Challenger Job-Cut Report says 35% more companies plan to fire workers this year and continue cost-cutting, the opposite of what is needed for a healthy economy. Jobless Claims are at a 5-year low. The 4-week moving average for Claims is now below the levels before the financial crisis in 2008. The unemployment data no longer counts the folks that have given up hope of finding a job and businesses are already operating at bare-bones levels unable to decrease head count further. The dollar/yen is 100.04 so the weaker yen provides a positive lift for futures.  Markets move higher at the opening bell with the SPX climbing from 1652 to 1658. At 10 AM, the ISM Services data is far better than expected, so traders believe this bolsters the taper case, and equities sell off and yields run higher (good news is bad news). Factory Orders disappoint. The SPX drops from 1658 to 1654 and then travels sideways the whole day as traders await the Jobs Report in the morning. The SPX tests the 20-day MA at 1658.90 today, and fails. The TRIN Arms Index prints a third day of uber low numbers which begs for a snap-back move (higher TRIN and lower equities).  After the closing bell, the 10-year yield hits 3% for the first time since July 2011. The 2-year yield is 0.50%. The 5-year moves above 1.80%. The 30-year yield lags at 3.85%.

On Friday, 9/6/13, the G20 meetings continue and should be centered on world economics but instead the Syria situation dominates the conversations with East versus West. Union Leader Tromka, instrumental in helping pass the Affordable Care Act, now says businesses are reducing employee work hours to 29 hours to avoid high Obamacare costs. France consumer confidence rises. German industrial production numbers unexpectedly drop. The 10-year yield is 2.97% slightly lower than the 3.00% number hit last evening, not seen since July 2011. Traders believe that either yields move higher with stocks moving lower, or, yields move higher with stocks moving higher.  No one, or very few, entertain the thought of yields dropping from here forward, with stocks dropping as well, which would be disinflationary and deflationary behavior. The consensus for the Monthly Jobs Report is 175K jobs and the unemployment rate to remain unchanged at 7.4%. The whisper number is 180K-200K jobs. The Jobs Report is 169K jobs, a disappointment, and the rate dips a tick to 7.3%. The lower rate is not due to millions of people finding work but the opposite. Folks are discouraged from finding work, since there are no jobs available, so they give up and the unemployment rate drops since these people are no longer counted. Average hourly earnings are slightly up which is a positive. The prior two month revisions result in a huge 74K reduction in jobs so that news was not as good as it originally appeared. In these sick perverse markets, however, bad news is good news, traders are hooked on the Fed’s easy money crack cocaine, so equity futures jump strongly higher, S&P’s +10, and the 10-year yield collapses from the 3% last evening down to 2.87%, 13 basis points. It is shameful what the so-called free markets have become. Obviously the Fed and central bankers are the markets; fundamentals, technical’s and price discovery be d*mned. Copper and retail sectors jump higher leading markets higher at the opening bell. The bulls are running higher when at 10 AM, Putin says he will support Syria if the U.S. strikes. Equities collapse on the news of escalating Syria tensions, oil sky rockets higher with WTIC crude almost at 111. Gold moves higher.  The SPX collapses from 1662 to 1640, 22 handles, in a heartbeat. News wires provide clarification and context on Putin’s comment and it turns out to be a reiteration of prior comments rather than anything new. Markets recover. The SPX jumps from 1640 to 1665 as the day moves along. At 2 PM, markets reverse again with the SPX dropping to 1655 at the closing bell. The SPX moves a total of 66 points, four percent, through a range of 1640-1665, in only six hours time, and this is with the VIX at 16-ish. When the VIX moves above 20 the moves will be even more erratic and violent.  FB prints a new 52-wk high at 44.61. For the week, the SPX gains +1.4%, the Dow is up +0.8%, unable to regain 15K, Nasdaq is +2% and RUT is up +1.8%.

On Saturday, 9/7/13, President Obama returns from the G20 which was dominated by Syria talk and tensions rather than economics. The president is unable to gain support for a Syria strike from the G20, the American people are against the strike, and it appears that Congress will likely vote against taking action. The Pope sends a letter to the G20 attendees warning them and the president that targeting Syria with military strikes is a ‘futile pursuit’ and to instead seek peaceful solutions.


On Monday, 9/9/13, Fed’s Williams speaks. Consumer Credit.

On Tuesday, 9/10/13, NFIB Small Biz Otimism.  JOLTS Report. 3-Year Note Auction

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.


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.


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.


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’sEuropean 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. Summers is the front runner, especially since President Obama referred to Ms. Yellen as ‘Mr.’ Yellen. Long traders prefer Yellen since she has a reputation and history of dovishness which would keep the QE party going.

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.


© The Keystone Speculator. All Rights Reserved. 2012. 2013.


  1. KS,

    How does JCP look to you as a buy?
    Since Ackman sold his position at $12.60, the stock has been moving higher.


    1. All the big boys are in it now and believe in a continued rebound. Note the positive divergence on the daily chart with the low September print, that was the time for a speculative trade long. The weekly chart is positively diverged as well showing a basing occurring and likely sideways to sideways up for the forseeable future. However, sideways is not too exciting. The CPCE signals a big sell off coming for markets so it is best to likely wait before entering most any long. JCP may move thru 12-15 for the next year as info on the company's future continues. It is not attractive from a speculative perspective, the trade was at 12.5 about 5 or 6 days ago. In the event of a large market sell off, however, and considering the big hedgies are in JCP now, to provide continued price support moving forward, JCP would not be place to consider to simply hide money and let it sit there to avoid the potential downdraft coming in equities.

    2. Very good! Thanks, KS!



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