MONDAY 7/28/14; TSN; CMI; Spain 10-Year Yield Drops Under 2.50%; Global Protectionism on the Rise; EMN; HLF

Asia trades higher with Australia flat. China’s Industrial Production data is up +17.9% way up from last month’s +8.9%. If the Chinese economy is doing so well (according to the government-supplied and manipulated data) why are companies not hiring workers? Global traders run with the headline news sending the SSEC +2.4% higher. The SSEC is up from 2050 to 2180, 130 points, +6.3%, in only four days. The Hang Seng Index is up +0.9% printing above 24.5K for the first time since 2010 and on the verge of equaling levels from 2008. The PBOC is pumping the stock market higher with easy money just like the Fed in the US and BOJ in Japan. The central bankers are the market.

Japan is up +0.5% with the dollar/yen at 101.86. Japanese banks run over +1% higher. Nissan travels flat after recalling over 200K vehicles due to faulty air bags. The KOSPI gains +0.7%. KB Financial gains +5%. Chinese authorities identify substandard conditions at OSI, the US meat supplier at the center of the food scandal in China, stopping meat production. US companies MCD, YUM, BKW and SBUX sever ties with the troubled meat supply company. Healthscope begins trading in Australia the largest IPO in four years.

Day 21 of the Israel-Hamas conflict and day 11 of the Gaza invasion begins. President Obama calls PM Netanyahu requesting an end to the conflict. Over 1000 Palestinians are dead including a few hundred children with over 40 Israeli soldiers killed. Hamas uses the Palestinians as pawns since weaponry and rocket launchers are stored in or near schools, hospitals and religious buildings. One-half of Palestinians are fed-up with the violence and want solutions while the other one-half continue to support Hamas. Secretary of State Kerry returns to the US. An unofficial cease-fire is in place in Gaza. Israel says it will only respond to Hamas rocket fire. Hamas fires several rockets, and Israel responds, but the tentative humanitarian cease-fire remains and an uneasy calm exists in Israel and Gaza, for now.

An international court in The Hague rules that Russia must pay $50 billion to ex-Yukos shareholders. 







[Text is Redacted: Purchase July 2014-07 to Read the Complete Chronology]

European markets close on the weak side with the DAX down -0.5%. France’s CAC gains +0.3%. The auto makers such as Daimler, Porsche and BMW are slapped -3% lower. In Libya, oil and gasoline fuel tanks are burning out of control as a result of tribal fighting at the Tripoli Airport. The smoke is visible from space and fear grows that the spreading blaze will threaten nearby natural gas storage tanks which would create an explosion of epic proportions.

Equities recover off the lows but weaken at lunch time. The retail sector trades lower with consumer staples hit relatively harder. XLP -0.5%. Industrials lag on the disappointing CMI earnings. XLI -0.9%. Volatility remains elevated above 13. TRIN is 1.28 representing steady-eddy selling. Traders are chasing into the utility dividend stocks. XLU +1.1%. UTIL +0.9%.

The 2-Year Note Auction at 1 PM receives average participation going off at 0.54% yield the highest since May 2011. The stock market bulls stage a comeback with the major indexes back to the flat line fueled by lower volatility. VIX drops to 12.56. Equities recover as the Fed’s easy money floods into the markets.

Protectionism increases around the world. The US announces new impact duties on solar panels manufactured in China and Taiwan. This creates a dark cloud over the Asian solar manufacturers. ENPH melts -7.6%. Governments choose stock market winners and losers these days. YGE -2.9%. GTAT drops -5.6% but also provides glass for the iPhone and other smartphones so it may be able to redeem itself. The US solar stocks that are now “protected” by the new policies are FSLR and SPWR up +2.3% and +2.6%, respectively. Protectionism begins a global race and spiral to the bottom; how long before the Asian manufacturers retaliate? The TAN ETF trades up slightly today and may stagger sideways moving forward receiving positive and negative influences as mentioned.

The day ends mixed with the broad indexes recovering strongly off the bottom around 10 AM. The central banker asset purchases between 10 AM and 11 AM each day always save the day. The SPX gains less than one point at 1979 using the 20-day MA at 1975 as support. The Dow finishes up 22 points, +0.1%, to 16983, but remains under the 20-day MA at 17011 as well as the coveted 17K level.

On the down side, the COMPQ loses 5 points, -0.1%, to 4445, using the 20-day MA at 4434 as support. The RUT small caps lose 5 points, -0.5%, to 1140 under its 20, 50 and 200-day MA’s leading the broad indexes lower along with technology stocks. CMI drops -3.2%. Homebuilders are whacked. XHB -1.6%. LEN -2.1%. BlackBerry is given a raspberry with BBRY dropping -3.1%. FDO launches +25% on the takeover deal with DLTR gaining +1.2%. DG is left at the dollar store altar trading flat.

The retail sector is weak early in the day but recovers. XRT is at 84.24 exactly at the 200-day MA support at 84.27. Whichever way the retail stocks pivot, so goes the broad market. The dollar/yen is flat at 101.84. Ditto euro at 1.3437. The US Dollar basket, USD, is dead flat at 81.12. Copper is dead flat at 3.24. Ditto gold at 1304. Oil trading is uneventful. WTIC 101.43. Brent 107.50.

After the closing bell, HLF reports earnings that miss by a penny at 1.55 on EPS. The top line sales miss at $1.31 billion versus the $1.36 billion expected. Herbalife reports its first earnings miss in six years. HLF is beaten mercilessly losing -10% in AH trading. Software-provider ADVS gains +0.9% on an earnings beat. Machine-vision products maker CGNX rocket launches +16% on better than expected earnings. Companies would rather employ robots than humans since robots do not sleep, eat or complain like humans. DRI pops +4% after CEO and Chairman Clarence Otis steps down.

NCLH hits an iceberg and capsizes -4%, figuratively only, after missing on top and bottom lines. The lumber darling PCL is cut -2.8% lower after beating on earnings but forecasting softness ahead due to a lackluster housing market. Important chemical company EMN is the last to report earnings this evening with a healthy eight-cent beat on EPS but a miss on top line revenue. Eastman Chemical reaffirms guidance for 2014. EMN shares knee-jerk to the downside but then settle in sideways. Chemicals are an important bellwether for the economy and the sector should be far more robust with growing sales if the global economy was running on all cylinders as the economists, traders, strategists and analysts tout daily.

Dr Marc Faber of the Gloom, Boom and Doom Report repeats his call for a -20% to -30% drop in stocks but now says equities may print new highs first over the next couple months before the selloff occurs. Even one of the very few market bears is now hedging the downside call with more upside first. Dennis Gartman of the Gartman Letter mocks Faber saying “this is a bull market and do not even think of going short.” Gartman cheer leads the bull case for the stock market with authority and then in one fell swoop destroys credibility by ridiculously saying, “I may be wrong.” He would make a great two-handed economist; on one hand stocks will go up but on the other hand they may go down.

The liberal and democratic-leaning CNN announces poll results where 53% of the country would rather have Mitt Romney as president with 44% for President Obama. Buyer’s remorse has set in for President Obama as a result of all the ongoing scandals and lack of leadership. Many Americans probably believe the November 2012 presidential election was rigged since the Benghazi 911 terrorism incident was swept under the rug at the time and the IRS scandal prevented Tea Party and conservative groups from forming to rally the republican vote. Both sides are guilty of dirty politics throughout history.

Americans will always rally behind the winner of a presidential election regardless of political affiliation but respect is lost if the contest appears rigged and cheating was involved. In fairness to President Obama, recent Presidents Clinton and Bush watched approval ratings fall in their respective 6th through 8th years (a US presidential term is four years and a two-term president serves eight years). Folks have a shorter attention span these days and tire of the same face in the Whitehouse for eight long years. The world falling apart is not helping the president’s approval rating.