THURSDAY 3/20/14; Yellen Aftermath; Existing Home Sales; Philly Fed; Bank Stress Tests

Asia trades lower following the US. Australia’s SPASX200 loses -1.2%. Aussie gold miners are slapped with Kingsgate Consolidated losing -20% and both Evolution Mining and Alacer Gold drop -9%. Myer, Australia’s largest retail department store, drops -5% on weak earnings. NIKK -1.7%. Dollar/yen is flat at 102.37. Japanese banks are hit about -2%. TM dumps -1.5%. Foreign ownership in Japanese stocks took a strong move lower over the last week. SSEC -1.4%. HSI -1.8%. GS decreases GDP projections for China expecting slower growth. CHL -3.6% on weak earnings. Chinese property developers rebound. Warren Buffett’s Chinese auto play Byd Company collapses -14%. KOSPI -1%. The dollar/yuan prints a new one-year low. Indian markets trade flat at new highs.

The global market negativity cascades to Europe. Machines take the major indexes uniformly lower -0.6%. Euro is flat at 1.3823. UK retailer NEXT reports strong profits +1.5%. EU Commissioner Olli Rehn says monetary aid to Ukraine is needed quickly. Ukraine warns that Russia may step up aggression on the eastern border. EU leaders meet in Brussels but the West is unable to provide a cohesive plan to counteract Russia’s aggression into Ukraine. European nations are cold to the idea of sanctions since their companies will be hurt just like the Russian companies. This places the West in a milk toast position and emboldens Putin. Russia aggression can continue without resistance. The Ukraine military is humiliated exiting the Crimea bases relinquishing control to Russia in essence surrendering. Russia’s Micex Index is trading slightly positive.

At 4:30 AM, US futures recover. S&P futures are moving between -3 and the flat line. Dollar/yen 102.38. Euro 1.3829. Dollar index is 79.98 teasing above and below the 80 level. The 10-year yield is 2.76% the same as the UK gilt. The German bund is 1.6% and Italy’s 10-year yield is 3.43%. The Flight 370 saga continues with floating debris spotted in the Indian Ocean southwest of Australia. Search crews are en route to identify the potential airplane wreckage.

[Text is Redacted: Purchase March 2014-03 to Read the Complete Chronology]

At 4 PM, bank stress tests results are released for 30 banks showing that 29 passed with one failure; ZION, which is slapped -4% in AH trading; it later settles at -1%. There was never any doubt the banks would pass. And the insiders made big money this week buying the long side since they were given the results ahead of time. Banks such as C and BAC are up +7% this week in only four days. As George Carlin the comedian would quip, “It’s a big club, and you ain’t in it.” If another financial crisis occurs a la five years ago, the three banks that stand to lose the most money are BAC, C and JPM. Since 1 of 30 banks failed, the ongoing ECB stress tests for European banks this year will likely paint the results with 3 to 5 failures; a couple more than the US but well under any level to cause panic. The central bankers massage the numbers.

After the bell, SYMC is halted from trading due to termination of the CEO Bennett. A replacement, Michael Brown, is named as interim CEO. SYMC reopens and collapses -10%. NKE beats comfortably on earnings and jumps +1.7%. In the conference call, Nike voices concern over foreign exchange headwinds and says China sales will be flat to lower. NKE starts puking and loses the gains dropping -1.5% with over a 3% turnaround in one-half hour. WTIC crudeoi8l drops under 99. S&P rating agency downgrades the outlook for Russia from stable to negative due to the increasing geopolitical risks.

Over 80% of the earnings reports have blamed ‘weather’ for lackluster sales and profit.  Pundits and television analysts wax worry about ‘frothy’ high stock valuations but with the next breath continue to tell folks to buy stocks. Bears remain scarce. Financial writer Jonathon Yates creates controversy telling folks to use a home equity line to buy stocks. This is something you hear at market tops. The IPO frenzy is another indicator of a market topping out. CBOE SKEW prints at 143 a couple days ago the same level that identified the market top to begin the year. Complacency rules the markets. VIX cannot gain traction higher and remains under 14 verifying the lack of fear. CPC and CPCE put/call ratios continue to print low numbers signaling complacency and a relaxed long trader that simply believes stocks will move higher without fear or worry; typically where a market top occurs. Geopolitical problems are not priced into stocks. The wine is flowing like water.

Shamefully, the president’s press secretary Jay Carney tells a CBS reporter that he typically receives the press briefing questions in advance from the ‘journalists’ asking the questions. As if this is not collusive enough, Carney will write answers down that help the reporters write their stories. In other words, the Whitehouse press briefings are choreographed theatre with phony reporters asking pre-rehearsed questions. This is the Ministry of Truth from George Orwell’s 1984. The reporters in Washington, DC, comingle with the politicians at parties and other drunken gala events. Their Caligula-style behavior rewards them interviews and access to the celebrity politicians; it is all very sick and a system that has lost its way. The so-called ‘journalists’ are actors that simply perform and write the way they are directed. Carney attempts to downplay the revelations and the reporter retracts the comments a few hours later but the truth is out and the damage is done.