TUESDAY 7/29/14; European Bond Yields at Multi-Century Lows; AMGN; AXP; MRK; PFE; UPS; Consumer Confidence at 7-Year High; REIT Conversion Strategy; Russian Sanctions; TWTR; X; YNDX

Asian markets are positive across the board. The dollar/yen rises to 101.87 so the weaker yen sends Japanese stocks higher. NIKK gains +0.6%. Japan data is mixed with weaker than expected retail sales but household spending beats expectations. Australia trades lower continuing a three-day selloff to begin the day but finishes up +0.2%. QBE Insurance collapses -11% after lowering profit forecasts. Indian markets are closed due to a holiday.

The SSEC is up +0.2% and HSI leads Asia gaining +0.9%. Both the Shanghai Index and the Hang Seng Index, respectively, print six consecutive up days. Bank of Communications is up over +13% the last two days on a plan for the state-controlled bank to sell stakes to private investors. This action creates a new style of ownership structure for Chinese banks if successful. The KOSPI bounces +0.6% to 2062 the highest print since 2011. Korea is a favorite flavor of traders lately so the central banker easy money pumps the stock market higher. Samsung is delaying the New Tizen phone release but the stock bounces +2%. MSFT is targeted by Chinese regulators in an anti-trust probe that may require a settlement of one billion dollars or more.

President Obama sends a letter to President Putin accusing Russia of violating the 1987 Missile Treaty signed by President Reagan and Soviet leader Mikhail Gorbachev. President Obama calls the treaty breach a serious matter that must be addressed. The letter escalates cold war tensions between the US and Russia. The Micex is up +0.5% showing a wait and see attitude over the pending sanctions expected today from the EU. The Russian Ruble currency pair moves higher to 35.69 indicating that the ruble is weakening and there is worry and angst over the sanctions.

The Israel-Hamas conflict enters day 22 and day 12 of the Gaza incursion with the most violent fighting so far. Hamas militants enter Israel through a tunnel and kill several Israeli troops. Gaza’s second largest power plant is bombed so the Palestinian’s go from a few hours of electricity per day to none. Over 1100 are killed over the last three weeks with 60 Israeli’s, mainly soldiers, dead.

Israel PM Netanyahu prepares the country for a long conflict ahead. The fighting continues as a cease-fire fails and confidence in Secretary Kerry is lost. Detractors accuse Kerry of favoring Hamas and treating Israel like second class citizens when the US and Israel are supposed to be great allies. Anti-Semitism is on the rise around the globe which creates a new wrinkle in the fight over the Holy Land. Turkish PM Erdogan tells the Jewish community to denounce the Israeli government creating greater instability in Turkey.

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

Volatility leaps higher above 13. The SPX collapses from 1981 to below 1975 in ten minutes time. The Dow collapses from above 17K to 16955. The sanction affect was a delayed reaction. Traders expect the Fed’s easy money to paper over all problems as it has for over five years running. When you always have rich Uncle Ben, now Aunt Janet, patting your behind each day, you get used to that and there is no reason to look at fundamentals or technicals anymore.

The day ends with the SPX down 9 points, -0.5%, 1970, under the 20-day MA at 1975. The INDU drops 70 points reversing the 70 point gain earlier in the day. The Dow is down -0.4% to 16912 with the 50-day MA at 16866 serving as support. The COMPQ drops for four consecutive days the first time this occurs in four months; the Nasdaq loses 2 points, call it flat, to 4443, using the 20-day MA at 4436 as support.

The RUT drops 2 points, -0.2%, to 1142, remaining under the 200-day MA at 1142. The Russell 2000 Small caps Index triggers an important cyclical bear market signal. The slope of the 150-day MA turns negative for the first time in over two years. The RUT has been in a cyclical bull market from when the 150-day MA sloped positive in March 2012 at 800-ish. The cyclical bull rules the roost until today. The expectation would be that the RUT will roll over further now and the broader markets will follow suit for a long and sustained cyclical bear market ahead that may last months or a couple years. The 150-day MA sloping negative today is the exact inception of the cyclical bear market now beginning. Bulls must push the RUT higher in the days and couple weeks forward to slope the 150-day MA positive and maintain the rally party.

The IYZ telecom sector ETF gains +3.2% on the new REIT conversion strategy orgy party today. The market bulls have a new tool to pump stock markets higher. No one cares about earnings; they are so passé and old school. In this modern era of ZIRP Forever, all that matters is the central banker easy money that fuels dividend increases, buybacks and REIT conversions to pump the stock price higher in the short term. If you have money you are making a killing by raping the stock market daily courtesy of the Fed. If you are middle class or poor, you are the sucker paying the way.

Utilities are smacked. XLU -0.9%. Financials are weak. XLF -0.5%. BAC -1%. C -0.6%. Airlines go into a nosedive. XAL -1%. Biotech is the winner today. IBB +1.1%. GLW is picking up the pieces of broken glass after collapsing -9.3%. HLF pukes -13.1%. WYNN bounces +3.1% on strong Las Vegas revenue. COST gains +1.5%.

After the closing bell, much-awaited Twitter reports strong earnings and user growth and TWTR catapults over +30% higher in AH trading. Ad revenue including mobile advertising is robust. The Internet stocks, tech sector and the Nasdaq should all feel some love tomorrow. LNKD, FB, YELP and others trade higher. Chinese social media WB leaps +7%.

Buffalo Wild Wings beats on earnings but guides lower. BWLD slips on the cooking grease stumbling -10% lower. Steel-maker X reports strong earnings and forges a +9.1% gain. Traders are happy that US Steel only lost 12 cents on EPS instead of the 29 cents expected. X beat on the top line with $4.4 billion versus $4.2 billion expected. Movie-maker DWA misses on earnings with a larger EPS loss than expected and top line revenue at $122 million versus $138 million expectations.

Dow component and credit card company American Express beats on EPS but only matches top line sales. AXP trades slightly negative. Biotech Amgen beats on earnings and plans to cut 12% to 15% of its workforce. AMGN bounces +3.5%. VRTX results disappoint traders and the stock drops -1.6%. Panera Bread earnings are not impressive but the dough rises with PNRA gaining +1%. Hotelier Marriott beats on EPS but misses on top line sales. MAR gains +0.5%. RGR shoots itself in the foot down -5.5% after reporting disappointing earnings. SWHC falls -2.3% lower in sympathy so keep the guns away from the long traders in these stocks for a day or two. Russia’s YNDX reports an earnings beat and guides higher gaining +2.1% in late trading. Sanctions, schmanctions.

President Obama says the new Russian sanctions announced today will take a “bigger bite.” The US sanctions are boosted to include four Russian companies; United Shipbuilding, VTB, Bank of Moscow and the Russian Agriculture Bank. WTIC crude oil leaks under 101 printing a 100 handle briefly. Brent remains sticky at 107.50 as there is no let up in the Middle East, northern Africa or Ukraine turmoil. Overnight and tomorrow the equity and currency markets and especially Russian stocks and the Russian Ruble will price-in the new sanctions. Will the sanctions bite?