FRIDAY 4/11/14; PPI; Consumer Sentiment; JPM; WFC; Market Selling Continues

Asia is lower across the board. NIKK plummets -2.4% logging the worst week since the Fukishima disaster three years ago. The NIKK loses the 14K level now at October lows. The Topix has the worst week since last summer. The dollar/yen drops to 101.32 but recovers to 101.83. The dollar index is down every day this week and prints the worst weekly drop in eight months. The USD plummets from 80.8 to 79.4 in five days, -1.7%, a huge move for a currency. Fast Retailing plummets -8%. SSEC -0.2%. HSI – 0.8%.

Australia is down -1%. The Aussie dollar hits a five-month high of 0.9439 (from 0.90 to over 0.94 in only one month’s time) before retreating. A CAT 5 tropical cyclone hits the northern Australia coast. KOSPI -0.6%. Samsung drops -1% after releasing an updated version of the Galaxy S smartphone. China’s inflation remains below the government target of 3.5% which opens the door to implementing stimulus if the PBOC desires. Q1 may be the weakest quarter for China in years. 




[Text is Redacted: Purchase April 2014-04 to Read the Complete Chronology]

The banks are weak. C -1%. BAC -1.6%. GS -1.3%. MS -1.6%. JPM -3.1%. XLF -0.8%. KRE -0.7%. BKX -1.1%. Warren Buffett smiles with glee since the only bright spot in the financial sector is WFC gaining +0.7%. WTIC crude oil moves up to 104.

At 11 AM, President Obama nominates Sylvia Matthews Burwell to replace Kathleen Sebelius at HHS. Burwell is expected to move through the approval process and will become the new face of Obamacare. The Nasdaq turns positive. The SPX and RUT are flat. The Dow remains slightly negative. Copper reverses course and turns negative. The dollar/yen is up to 101.67 so the weaker yen provides lift in equities. XLF -0.4%. SOX -0.2%. VIX 16.00. SPX recovers to 1832 so the strong 1828 support is holding.

At 1 PM markets deteriorate. The Dow is down triple digits losing 105 points. VIX is up to 16.84 approaching 17. Copper is negative. Palladium is the lone gainer in metals. Dollar/yen 101.56. GILD is the best performer today on the Nasdaq recovering +3.8% after the recent drubbing. WIN is smacked -1.9% lower giving up all of yesterday’s gains. Traders buy  Windstream because it has the highest dividend at 11%. At 1:30 PM, the broad indexes stagger lower and are testing the lows of the day.

Putin escalates the natural gas wars across Ukraine and Europe demanding that Gazprom be paid or there will be repercussions. The US and Europe remain docile. Syria uses chemical weapons in four separate attacks against its citizens creating more turmoil in the Middle East. Markets turn sour. Traders must decide on what positions to hold through the weekend.

Semiconductors collapse at 2:15 PM. Equities print new lows for the day with the Dow down 134 points, SPX down 13 points and Nasdaq losing 40 points. The major indexes are down between -0.7% and -1.3%. The VIX jumps above 17 to 17.23. TRIN is 1.36 representing a steady-eddy orderly selling day without any panic occurring. Orderly selling days usually lead to more orderly selling days. The volume is below average reflecting a strong absence of buyers so markets stagger lower.

Consumer discretionary, XLY, is the worst sector dumping -1.1%. LB, URBN and KORS are all down -3% to -4%. JCP is collapsing -10%. GPS is beaten -2.4%. Typically, traders will monitor the Masters Golf Tournament but the stock market requires full attention. Golfer Bubba Watson, and holder of a green jacket, strings together multiple birdies and leads the Masters golf contest at -8 under par with the second round in full swing (four rounds are played with the final round on Sunday).

The SPX drops to 1818. Documents surface in the General Motors investigation showing that Mary Barra was made aware of steering problems in 2011. Barra said she did not have any knowledge of the problems. Traders are jumping ship and giving up on the stock. GM crashes into the ditch dumping -4.5% on the news. The problems at General Motors are going to continue a long time.

Markets are in free fall. At 2:43 PM, the Nasdaq collapses through the psychological 4K level. At 2:49 PM, the TICK machine prints -1100 identifying a market low at SPX 1815. The Dow is down 152 points at 16018 only 18 bucks from losing 16K. The RUT small caps are down -1.7%. The carnage continues. The 10-year yield holds steady at 2.61%. The 2.58%-2.60% level is strong support over the last couple months and if it fails, a yield at and under 2.50% will likely be guaranteed in the near future.

HLF plummets -12% as news wires say a criminal probe is launched into Herbalife by the DOJ and FBI. HLF denies the probe. Multi-level marketing company NUS loses -4% in sympathy.  Equities languish into the closing bell. The Nasdaq teeters at 4000. Dollar/yen 101.61. Traders blame a lot of the market selling on tax season. The deadline to file taxes is Tuesday, 4/15/14. Seasonality-wise, markets are typically weak in front of the tax deadline and then recover after April 15th.

At the closing bell, the drama with Nasdaq 4000 continues as the day settles out. The SPX loses 17 points, -0.9%, to 1816. The Dow loses 142 points, -0.9%, to 16028. The Nasdaq loses 54 points, -1.3%, to 3999.73, a single hair under the psychological 4K level which is multi-month support. The Nasdaq closes under 4K for the first time since February. The RUT loses 16 points, -1.4%, to 1111.

VIX finishes above 17 at 17.26. Utilities are flat. Telecom, IYZ, dumps -2%. XLY -1.4%. XLF -1.4%. The banks all finish negative except WFC +0.7%. JPM loses -3.6% and is down -7.4% this week. A lot of long players worship at CEO Jamie Dimon’s altar and expected stellar earnings (which missed instead) so they had their heads handed to them. SOX -1.6%. SMH -1.5%. Consumer discretionary, financials and semiconductors push the broad indexes lower. The majority of traders this year tout financials as the sector that will create new market highs but are now abandoning this scenario. NQ Mobile, a bearish play publicized by noted short seller Carson Block of Muddy Waters Research, plunges -21% after missing earnings.

For the week, the SPX drops 49 points, -2.7%,. The Dow is off 386 points, -2.4%. The Nasdaq is pummeled 128 points, -3.1%. The RUT small caps drop 42 points, -3.6%. All the major indexes have lost their 20-week MA’s; a highly significant support level that forecasts lower prices ahead. TRAN loses -2.8% this week and prints exactly at its 20-week MA at 7360 and will make an important directional decision on Monday. The 10-year yield is 2.62%. The Baltic Dry Index, BDI, continues to drop this year now down from above 2300 to 1000, -57%. The drop in ocean shipping stocks verifies the China economic slowdown.

After the closing bell, Senator Blumenthal calls for General Motors to establish a compensation fund to handle the automobile recall disaster. Considering the revelations that Barra may have known about the car problems in 2011, she may face fraud charges moving forward. Barra is the first female head of GM and may end up being the CEO with the shortest tenure at GM. Government authorities deepen their investigation. GM collapses -4.1% today and is down -8.3% for the week. GM peaked at 41.60 in December and is now under 32, a drop of -24%.

AMZN announces plans to pay $5000 to unhappy employees to encourage them to quit. The gimmick creates a buzz. Amazon can boast about how everyone is happy since very few if anyone will accept the offer. In truth, if an employee is fired (layoff), that worker can collect unemployment compensation that will total $10K to $15K and more so only an idiot would quit. In addition, the offer is only for fulfillment center employees so the maneuver is an attempt to front-run potential unionization.