TUESDAY 6/24/14; New Home Sales; Consumer Confidence; WAG

The NIKK trades flat overnight. The dollar/yen remains at the 102 pivot point. US and Japan stock markets will move higher if the dollar/yen pivots higher (weaker yen) above 102 and lower if the dollar/yen pivots lower (stronger yen) below 102. After the market close, Japan’s PM Shinzo Abe speaks firing the third arrow of his multi-year financial plan which includes labor plans and tax cuts for businesses. Abe plans to cut the corporate tax rate from 36% to 30% over the next several years. Abe wants to bring more women and foreigners into the workforce and is likely very concerned over Japan’s aging demographics.

China’s SSEC and HSI both gain +0.5%. Local Chinese governments are relaxing restrictions on the alcoholic beverage sector so booze-making stocks celebrate higher. The KOSPI jumps +1% as traders adopt a buy-the-dip philosophy for South Korea. A tee shirt manufacturer and screen printer in Indonesia is selling shirts that are anti-Israel and promote global terrorism groups such as ISIS, Mujai-Iideen, Taliban and Hamas.

Australia’s SPASX200 loses -0.4%. Iron ore prices continue lower and miners are weak after the short-term joy with the China PMI data. The Dollar/Rand is 10.5779 as strikes come to an end in South Africa. Platinum is catching a bid while palladium moves flat at 1462 and 824, respectively. Gold, silver and copper all trade slightly lower.

Many Dubai, United Arab Emirates, stocks are limit down as the benchmark Dubai index plummets -8%. Dubai’s main construction company Arabtec is collapsing -10% triggering the downside limits for three consecutive days. Last week, Arabtec chief executive Hasan Ismarik resigned as company layoffs were announced. The rats are leaving a sinking ship. Property stocks are slapped hard triggering downside limits. The socioeconomic skyscraper indicator signals a stock market top when a country builds an obscenely tall building since it typically indicates an overheated housing market. In less than ten years, Dubai has developed a world class skyline with the largest skyscraper boom in history occurring. The spectacular Burj Khalifa tower is the tallest building in the world (2722 feet (830 m)) as of 2009 and the Princess Tower, completed in 2012, is the tallest residential building in the world. The skyscraper indicator is now extracting its pound of flesh from Dubai.

Ukraine is calm as the cease-fire, in effect until 6/27/14, is honored by both the government forces and pro-Russian separatists. In Iraq, Secretary of State Kerry flies to northern Iraq to consult with Kurdish leaders. US involvement will increase if the Iraq government can unite all three factions with a plan going forward. ISIS targets are currently being identified and tracked for potential air strikes. After a two-week battle, the Iraq forces crumble again losing control of the Baiji oil refinery; the largest refinery in Iraq. Oil prices stabilize with WTIC at 106 and Brent at 114 since ISIS has not pushed further south to the oil fields.

Europe floats higher after the opening bell. Euro 1.3611. Swiss-company Syngenta leaps +6.5% after turning down a takeover bid by MON. Companies will continue pursuing Syngenta. Shire jumps +1% on news it is teaming with and receiving advice from GS as more offers occur for the company. The global M&A orgy continues as US companies pursue ways to use cash held overseas as well as reduce taxes.

German IFO business sentiment index is light at 109.7 versus the 110.3 expectations. The sentiment continues a trend lower for three months. The worries over energy supplies due to the Ukraine turmoil and European deflation create much of the concern. The euro drops briefly under 1.36 to 1.3597. UBS upgrades BMW (Bayerische Motoren Werke AG) that drives +2.1% higher. Pharma stocks are well bid. Airbus gains +1%. BNP Paribas gains +0.6% since the pending fines from US regulators may be priced-in to the stock.

[Text is Redacted: Purchase June 2014-06 to Read the Complete Chronology]

The bullish euphoria and market joyousness continues. The global M&A party is in full swing and 18 IPO’s are slated for trading this week including GoPro; the helmet and body-mounted action camera maker. Pundits say China will not have a hard landing. Other talking heads say low volatility is not a signal of worry but instead forecasts a higher stock market all summer long. Strategists, analysts and traders continue to remain strongly bullish especially after Fed Chair Yellen cheer leaded the markets last week saying there are no asset bubbles and stocks are undervalued.

Traders waxing concern and worry about a market correction are instead buying stocks and call options ten minutes after their television interview ends and remaining net long. The stock market is not climbing a wall of worry but instead climbing a wall of Fed. Caution is warranted since the robust M&A and IPO action is typically indicative of a stock market top as well as the complacency signaled by the VIX, CPC and CPCE.

At 4:30 AM, the FTSE and Italy’s MIB turn negative. US futures remain flat overnight slipping ever so slightly lower as the dollar/yen moves down to 101.89. The 10-year yield remains flat as a pancake at 2.61%. Copper recovers to the flat line. Japan’s PM Abe’s comments do not impact the dollar/yen or markets. The Feds subpoena DF concerning the ongoing insider-trading investigation into activist investor Carl Icahn, pro golfer Phil Mickelson and sports gambler Billy Walters.

More euphoric bullishness and complacency occurs. On Bloomberg, Conaccord’s strategist Tony Dwyer is very bullish forecasting higher stock prices. He hedges saying a -5% drop should occur over the coming weeks or months but this will be a key buying opportunity. Dwyer exhibits robust confidence for higher stock markets proclaiming that, “There will be no recession over the next four years.” Dwyer says there is no stock or housing bubbles. Wells Capital Management’s permabull James Paulsen instructs investors to “not abort the run prematurely,” and “several more years of run (higher stocks) are left.” A picture of a bear is placed on a milk carton since there are none in sight. Bears may have gone extinct.

At 6:30 AM, a Syrian air strike kills several people along the Syria-Iraq border. Perhaps Asaad is content in seeing the Middle East explode into world war and is doing his part to stir the pot. Futures deteriorate over the last couple hours. S&P -5. Dow -30. Nasdaq -8. The 10-year yield is 2.60%. Metals reverse overnight softness and trade higher across the board. Ag commodities trade lower.

Former News of the World editor Rebekah Brooks is found not guilty of conspiracy charges concerning the politician and celebrity hacking scandal in the UK. Brooks was vilified and held out as the scape goat for the Murdoch News Corp scandal but now walks free. Andy Coulson, Brooks’ deputy, is found guilty of conspiracy to intercept phone messages and other court cases continue. The scandal accuses several individuals of spying and intrusive hacking of communications for the purpose of scooping news stories.

Four executives at the US Import-Export Bank (Ex-Im Bank) have been removed from their positions in recent weeks. An investigation is underway concerning gifts and kickbacks that banking officials are receiving in exchange for offering and approving favorable loans. MU trades up +1.2% pre-market on the happy earnings news last evening. VRTX catapults +52% on positive results with its cystic fibrosis drug. The biotech and pharma sectors should feel love today.

Walgreen earnings miss on both the top and bottom lines so WAG is beaten -2.5%. C downgrades DPS so Dr Pepper and Snapple may go flat today. AVP plans to cut 600 workers so less people will have to fill the same number of perfume bottles. LORL collapses -6% after talks with investors over the sale of the company end. Fed’s Plosser says rates may rise sooner than expected due to an improving economy; however, he is a hawk and is always touting the same message.

The S&P Case-Shiller House Price Index shows the pace of house price gains are slowing but house prices remain about +10% higher overall. The 10-city average house price metric is up +10.8%. Economist Robert Shiller says the modest pace of ever higher home prices appears healthy. On the stock market, Shiller’s CAPE ratio is over 26. This PE ratio uses multi-year data to provide a better picture of stock valuation. The only other times the CAPE ratio has been this high or higher is in 1929, 2000 and 2007; all significant multi-year tops. Shiller continues to caution, however, that you never know where the top is actually at and the lofty conditions can continue for weeks or months.

The session begins mixed with the SPX and Dow lower and the Nasdaq and RUT higher. The 10-year yield briefly dips under 2.60% but recovers. CCL drops -2.3% after missing on earnings. At 10 AM, the New Home Sales are 504K up a huge +18.6% when only a paltry +0.5% was expected. Sales are at the highest level since May 2008. Last month was 425K. New home sales are a far smaller market than existing home sales and the numbers are skewed towards the high-end since the wealthy, made wealthier by the Fed’s Keynesian policies, are cashing out and spending profits on real estate. The starter family and middle class house market remains challenged.

Consumer Confidence is 85.2 at a six-year high blowing out the prior months 83.5 which is a higher revision. Confidence is now trending higher for four months in a row. The Richmond Fed Mfg data is weaker than expected at 3 dropping from last month’s 7 number. Traders run higher on the stronger housing and Con Con data ignoring the Richmond Fed data. The broad indexes are positive across the board as the dollar/yen moves above 102 to 102.14. Banzai! The weaker yen sends stocks higher.

The BOJ, Fed and other central bankers are the market. Long traders are drunk off the Fed’s wine and ecstatic over Fed Chair Yellen’s stock market cheer leading and commitment to sending stocks higher. Bullish traders sing, “for she’s a jolly-good fellow” honoring Yellen; the QE Keynesian Queen.

INTC is up +1.7% at a 10-year high. AMAT gains +1.3%. SOX gains +0.3%. The weakness in semiconductors yesterday was a mirage since chips are back on their upward trek. Biotech stocks are also outperforming. IBB +2.1%. The joyous day peaks at 11 AM.

Equities top out and move lower for the remainder of the session. The 2-Year Note Auction is less than stellar with below average demand. Energy stocks reverse course with XLE whacked -2.1%. Financials sell off with XLF -0.7%. The semiconductor jump reverses and SOX moves -0.7% lower. EOG pukes -4%. WTIC oil drops under 106. It is not a healthy sign to see markets rally off of stronger housing and other data but to then reverse course and weaken; equities are not rising on stronger data. Perhaps the reality that the Fed punch bowl may actually disappear over time is causing the stock market weakness (good economic news is bad news for stocks since the Fed will continue to decrease the rate of easy money).

Ag commodities are selling off today. Corn and wheat are down about -2% over the last couple sessions. The food prices ebb and flow with weather so the drop in corn prices should ease the current food inflation. Cattle, pigs and chickens grow fat off of grains so over time meat and poultry prices should decrease to more reasonable levels.

AMBA pops +6% then pulls back to +2.7% since it makes the chips that go into GoPro cameras. The GPRO IPO is to begin trading this week. Ambarella also produces chips for the Google Nest products. GRPN jumps +5% higher trying to recover from this year’s -40% deficit. FB is up +2.1 on news that teenagers may not be dissing Facebook as much as thought. In reality, the young are using Instagram so by default they are using FB. The tweens, teenagers and young adults regularly use the word “insta” nowadays referring to sending and receiving messages and pics via Instagram.

Despite the markets selling off with the Dow down triple digits, the bullish parade of analysts and traders continue. Wunderlich’s Art Hogan  praises the energy and financial sectors looking for higher markets. LPL Financial strategist Jeff Kleintop repeats the bull mantra saying there is “lots more upside ahead.”

HAS drops -0.5% despite a Piper Jaffray upgrade. HCLP leaps +4% higher. EBAY loses -1.1%. RSH crumbles down to 0.81 to begin the day the lowest print since the 1970’s. RadioShack may go belly-up and needs a white knight to ride in to save the day. Dip buyers and speculators step in and buy RSH sending the stock up +2.3% by the closing bell.

The day ends with the SPX losing 13 points, -0.6%, to 1950. The SPX has now gone 47 days maintaining a tight 1% or less daily price range the longest streak since 1995 almost twenty years ago. The Dow loses 119 points, -0.7%, to 16818, exactly at the 20-day MA support. The pivot above, or below, this support is important for tomorrow. Bounce or die. The Dow logs the biggest loss in one month. The Nasdaq produces a sharp intraday reversal topping pennies from 4400 then dropping to 4342 and closing at 4350, -0.4%. The RUT drops 12 points, -1%, to 1173.

The VIX leaps higher above 12 from under 11 this morning so volatility shows slight signs of life. INTC finishes up +0.9%. MU gains +4% bucking the market negativity. VRTX gains +40% on its happy drug news this morning. Laggards are XOM, VZ, KMX and JPM losing from -1% to -4%.

The US is allowing two oil companies to begin selling unrefined oil to global markets; Pioneer Natural Resources and Enterprise Products Partners. PXD and EPD will be well bid tomorrow. The ultra-light oil is plentiful due to the fracking process. The new action reverses a four-decade ban on oil exports. CNBC business television reports that Georgia is the most attractive State for business.

The wealthy, made wealthier by the Fed’s Keynesian policies, continue to cash-out and spend money on high-priced real estate, art and collectibles pumping these asset bubbles. Bob Dylan’s hand-written lyrics for Like a Rolling Stone sell for over $2 million at auction. Other memorabilia such as Michael Jackson’s coat are chased after by rich bidders celebrating these bread and circus days of central banker easy money. A poll shows that 60% of Americans disapprove of President Obama’s foreign policy.