MONDAY 6/23/14; PMI's; Existing Home Sales; XLE New All-Time Record Highs; MU

Japan trades manufacturing data is better than expected and the NIKK squeezes out a six-month high at 15369. The dollar/yen is 101.95 a touch under the 102 pivot point. Honda, Mazda and Nissan recall two million vehicles due to the ongoing airbag issue across the auto industry (supplier defects). China HSBC PMI is 50.8 beating the 49.7 expectations. A PMI above the 50 level indicates an economy that is expanding rather than contracting. Last month’s reading was 49.4. Despite the upbeat PMI data and the joyous Wall Street rally, the SSEC trades lower and the HSI loses -1.3%. Manufacturing company Hon Hai catapults higher on rumors that hundreds of personnel are being hired to manufacture AAPL’s iPhone 6.

The Aussie dollar is 0.9439 nearing this year’s 0.9461 peak. The commodity currencies are moving higher. The Canadian Dollar is at five-month highs at 1.0725. The miners also move higher on the China PMI. Copper reverses a negative start and trades higher up +0.8%. Higher copper, along with energy and oil, are key market upside drivers currently. India’s BSE drops -0.6% on worries that their elevated inflation will worsen with rising oil prices placing a drag on their economy.

The ISIS militants continue to take firm control of middle Iraq and consolidate power in the Anbar province. ISIS controls the main checkpoint at the Jordan border. Jordan is a US ally and is already in turmoil from the millions of refugees fleeing south from the Syria civil war. The goal of the ISIS radicals may be to begin a Sunni-Shiite conflict across the Middle East and drag the US in by creating instability in Jordan. ISIS takes control of a dam on the Euphrates River in Iraq with the militants following this ancient river southward. The Iraq army appears incapable of resisting the relatively small 10K fighting force of ISIS extremists.

Crude oil runs higher with WTIC up +0.4% at 107.25 and Brent up +0.6% at 115.44. Any increase in the spread between WTIC and Brent, as is occurring with the percentages, will send oil refiner stocks higher and keep the oil and energy sector elevated. WTIC is breaking up and out of its 106-107 sticky range and Brent is breaking up and out from its 114-115 pivot. US futures are following oil with the S&P’s up +4. Dow +30. Nasdaq +6.

France PMI is 47.8 very weak well under the 49.5 expected. The euro drops under 1.36. France is the weak link in the perceived European recovery (ECB and central banker-induced recovery). The data creates a sour tone for markets. German PMI is 52.4 missing the expectation at 52.5 by a single hair but rising month on month. The pound remains above 1.70 and currency analysts expect sterling to remain elevated. Online retailer Asos drops -2.3%, adding to a -40% drop this year, after its warehouse catches fire, but the stock returns to the flat line. Bouygues drops -0.5%. GE wins the bid for Alstom ending the long soap opera saga. Alstom trades lower. Siemens, the losing bidder for Alstom, drops -1.5%. Pharma company Shire loses -1.5%.

European indexes begin trading on the downside after upbeat futures for the last few hours. The CAC and DAX are down -0.7%. The Euro area Services PMI drops to 52.8 less than the 53.3 forecast. The euro is 1.3590 continuing to weaken. The soft European data confirms that Draghi will keep the money spigots on a long time. The China PMI data is better than expected but the European PMI data is softer than expected.

At 4 AM, US futures give up all the overnight gains and drop to the flat line with the Dow and Nasdaq slightly negative. The dollar/yen drifts lower to 101.83 so the stronger yen creates equity softness. The 10-year yield drops from 2.62% to 2.60% over the last hour. Gold and silver trade flat. Copper remains strongly higher up +0.8%. At 4:30 AM, the DAX is down more than -1% and the CAC -0.9%. The Wimbledon Championship tennis matches begin today at the All England Club in southwest London.

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The day ends with the SPX down fractionally at 1963. The tight trading range is the narrowest range in about 20 years. If you combine today’s and Friday’s tight price range action, it is the narrowest two-day range in 50 years. The odd market behavior continues. The INDU loses 10 points, -0.1%, to 16937. Market participants are focused on Dow 17K. The COMPQ gains fractionally to 4369. The RUT drops 3 points, -0.3%, to 1185, so the small caps lead lower.

TRAN is down during the entire section losing -0.5% despite oil pulling back. Utilities are weak taking a rest after last week’s rocket ride higher. Energy remains the outperformer with XLE up +0.3% printing a new all-time high at 101.52 and new all-time closing high at 101.29. Financials also lead with XLF up +0.2%.

After the closing bell, MU, the darling of long traders over the last year, beats on earnings with 79 cents EPS versus the 70 cents estimate on $3.98 billion revenue versus 3.89 billion expectations. Drive-in restaurant operator Sonic reports stronger than expected earnings and SONC trades higher AH’s. TAP trades higher after an upgrade by MS. Fitch raises NBR’s outlook from negative to stable. Electronic instruments provider GIGA drops on weak sales.

The bullish market sentiment continues. Notable technical analyst Ralph Acampora says, “You can’t fight the tape.” Acampora was negative on markets a couple months ago but reverses course shunning the bear side completely and clearly stating that up is the direction for stocks going forward. Federated’s strategist Phil Orlando chimes in with the bull perspective as well. There are no bears remaining in the stock market. Pundit after pundit is bullish one more so than the next. Fed Chair Yellen told everyone to buy stocks last week so the upside equity party continues with today’s down day only marginal and the Nasdaq is up.