THURSDAY 7/31/14; EOM; Argentina Default; Russia Sanctions; New Cold War Escalates; XOM; COP; K; MA; BZH; RYL; MOS; Stock Market Collapses; TSLA; LNKD; GPRO

The Argentina default creates a pall over global markets. The NIKK prints a six-month high but then finishes down -0.2%. The dollar/yen peaks at 103.15 (weaker yen creates the high in the Nikkei) and then drops back under 1043 to 102.80 (stronger yen weakens Japan markets and US futures). Nintendo collapses -6.5% on higher operating losses announced yesterday. Sony trades lower in sympathy. Mitsubishi Motors is a bright spot bouncing +2.6% after posting strong profits.

KOSPI drops -0.3%. Samsung is beaten -4% lower. China moves higher with the SSEC gaining +0.9% and HSI up +0.1% (seven-year highs), however, the IMF is urging China to lower its growth targets to levels more reflective of their economy. The IMF is concerned over risks to China’s economy due to the property market. The SPASX200 gains +0.2% printing six-year highs ignoring the weak building approval data and export price data. The land down under is partying like the rest of the world. Traders use the central banker easy money to buy stocks; trained like Pavlov’s dog.

The EU places additional sanctions against Russian oligarchs. European courts rule against the former Russian giant Yukos in a second settlement awarding $2.5 billion to prior shareholders. The new cold war between East and West escalates. Russia says the ruling is unfair as the West continues stacking up measures against the Ruskies. Shell reports robust profits and trades +3% higher but the news is not rosy. The Shell CEO says the MH17 airplane crash in Ukraine is a “game changer” and their exposure to Russia will greatly impact earnings moving forward. Russian telecom company Megafon moves assets out of US dollars and into Hong Kong dollars to avoid sanction risks. The rats are leaving a sinking ship. The Russian sanctions are beginning to take a bite after all.

Argentina acts defiantly saying they are not in a technical default. S&P rating agency says Argentina is in a default. Obviously, Argentina is in a default and is simply playing baby games. Argentina’s economy will be negatively impacted and GDP growth will immediately drop at least -1%. Concern grows over the ripple effects, contagion, that may occur throughout Latin America and perhaps the world. Argentina inflation will move strongly higher. The banking sector will be greatly affected stifling business development. Argentina’s shale gas and oil development will suffer since global companies will limit their involvement in a country that cannot pay its bills or manage its economy properly.

Argentina is a serial defaulter (defaulting seven times since 1816) and has destroyed their attractiveness as an investment. The Argentina people will suffer and cry as they listen to the famous song Don’t Cry for Me Argentina. Argentina tickers EDN, YPF, GGAL, TEO, BMA and BFR all trade lower.

Recapping history, Argentina defaulted on $100 billion of debt in 2001 which begins the country’s 13-year troubles. In 2005, Argentina agrees to exchange $62 billion in bond debt with $35 billion of new debt. About 93% of bond holders in Argentina settle for about 30 cents on the dollar to exit failed bond investments. About 7% of the bond holders are holdouts and begin court procedures to receive 100 cents on the dollar. Argentina reaches agreement with the Paris Club in May 2014 to pay $9.7 billion in debt. In June, the courts rule in favor of the holdout creditors and Argentina must honor the bonds. Argentina enters emergency talks with the holdout creditors during July, this month, but fail to reach an agreement by yesterday’s deadline. Argentina is now in default for the second time in 13 years and calls the holdout creditors “vultures.”

WTIC drops under 100 plummeting to 99.20 at lows not seen in three months under the 200-day MA support at 99.86. The disinflationary and deflationary forces due to a weakening global economy are overpowering the fear premium in the oil price due to turmoil and war in Ukraine, the Middle East (Syria, Iraq, Iran, Israel, Gaza, Egypt, Turkey) and northern Africa (Libya).

European indexes begin trading on the down side. Euro 1.338. The pound is 1.6876 under the 1.69 level. The DAX is down -1% on sanction angst while Spain’s IBEX collapses nearly -2% on the banking crisis concerns. Banco Espirito Santo shares are suspended from trading. The bank needs to raise capital after taking the $3.6 billion loss. BES resumes trading and plummets -48% down -65% over the last 30 days. Portugal tries to sweep the banking crisis under the rug but a lump appears in the carpet. Lloyds Bank suspends two traders that were involved in the Libor scandal. By definition, a suspension is a slap on the wrist so these nefarious individuals will continue to work there in the future. Banksters always protect their own and receive more lenient treatment than the common Joe.

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

JWN acquires a personalized clothing service for men called Trunk Club. Nordstrum’s is keeping pace with technology providing an online service with a personal touch. JWN trades down -1%. The blood is flowing from the front door of the homebuilders. XHB -2%. Utilities collapse with UTIL down -1.9%. XLP pukes -1.7% showing how homebuilders, utes and consumer staples drift lower when Treasury yields are elevated.

Industrials are shown no mercy. XLI -2%. The Internet stocks are killed. YELP -11%. LNKD -4%. TWTR -2.4%. The 3D stocks collapse. DDD -11%. SSYS -4%. VJET -9%. XONE -12%. One of these four hotshots had better print up a solution. The TNX drops from the 2.61% peak down to 2.54%, losing seven basis points, into lunch time. The 10-year yield is stumbling sideways at 2.55%-2.56%. A delayed flight to safety occurs today after the yield spiked and topped out at 2.61%.

The theme of companies lowering guidance and earnings estimates and blaming Russia sanctions continues with Anheuser-Busch projecting weaker beer sales in Ukraine and Russia. BUD drops -1.6% as traders drink away their problems. XOM is beaten -4.2% and COP is down -2.5% after this morning’s earnings releases.

WTIC oil is collapsing -1.8% under 98 to 97.65. Russia President Putin will not be happy since the country’s economy is based on oil and gas revenue, like the Saudi’s. Gold is down 11 bucks to 1284. Silver and copper are flat so the metals move sideways today through the turmoil.

Farm Prices remain low for corn as a bumper crop is expected. Corn, soy and wheat prices all post losses on the month (this is disinflationary not inflationary). Corn yields will likely break records this year. The lower corn prices will help reduce the food inflation that consumers see at the grocery store. Lower grain costs are good news to beef and poultry producers. Beef herds remain at lows not seen since 1952 but lower feed costs will bring the herds up quickly (over a few months time). The California drought conditions worsen.

AAPL drops -2.6% with a 95 handle not yet touching the 100 handle ever since the stock split. Traders are selling Apple in sympathy to the weak Samsung numbers out of Asia overnight. TMUS bounces +6.5% and is halted from trading on news of a takeover offer by Iliad for 33 per share. T-Mobile begins trading again and hugs the 33 price level. S drops -5.3% because T-Mobile and Sprint were supposed to mate. The long darling MU collapses over -6% after announcing weaker product pricing.

The carnage continues into the last hour of trading. The screens are blood red. The Dow is down over 300 points. VIX 16.77. Famous investor Warren Buffett says, “down days always make me feel good.” There are winners. Oil companies MPC, APA and refiners TSO and VLO post gains. LOCO continues crazy higher gaining +12% in a down tape.

The session ends with the SPX collapsing 39 points, -2%, to 1931, losing the 50-day MA at 1953. The INDU plummets 317 points, -1.9%, to 16563. The COMPQ loses 93 points, -2.1%, to 4370, using the 50-day MA at 4359 as support. The RUT drops 27 points, a huge -2.3%, to 1120. The RUT 150-day MA prints three consecutive days with a negative slope each day proving more and more that small caps have rolled over and a cyclical bear pattern is now in place (lower stock market for months potentially one or two years ahead). TRAN collapses from above 8500 to 8141 in six days, about 360 points, -4.2%.

For the month, the SPX drops -1.5% printing a negative month for July ending the long five-month rally. The INDU is down -1.6% for the month ending its five-month winning streak. The Nasdaq is -0.9% lower in July and now down four of the last seven months. The RUT is crushed -6.1% this month also logging four down months out of the last seven. The RUT prints an outside key reversal month with July’s monthly candlestick printing a higher high than June and then ending the month with a lower low than June; a bearish market signal.

After the closing bell, TSLA earnings are a beat with EPS at 11 cents versus 6 cents expected. The giga-battery factory talk continues with Tesla looking at building sites in Reno, Nevada, and other locations. Tesla’s stock price is very jumpy in AH’s trading; down -3%, up +1%, down -2%. GPRO collapses -10% despite beating on EPS with 8 cents versus 6 cents expected and $245 million versus $238 million expected. GPRO is up +97% since its debut of trading in June. Perhaps the GoPro CEO can post the video taken by his ‘camera on a stick’ showing his reaction to the collapse in stock price.

LNKD gains +9% after beating on top and bottom lines and raising guidance. EXPE beats earnings estimates and bounces +5.3%. Solar panel stock SPWR drops -4.7% on weaker guidance. OUTR drops -3.7% on weak earnings and outlook.

The CIA admits to spying on Congress. Lawmakers are irate that the top spy agency is monitoring their communications. How ironic that the same lawmakers that approve of ongoing spying on all Americans are now offended that they are spied on? Emory Hospital in Atlanta, Georgia, USA, has set up a special isolation unit to treat an ebola patient due to arrive within days. The deadly ebola virus is now on American shores.

Israel and Palestinians agree to an unconditional 72-hour cease-fire in Gaza to begin Friday at 8 AM local time (1 AM EST). All cease-fires have failed so far. Traders are on edge worrying about global contagion which could lead to a cascading market event.