Sunday, July 2, 2017

MONDAY 7/3/17; Japan Tankan Survey; Global PMI’s; ISM Mfg Index; US Markets Close Early; RUT (Russell 2000) and TRAN (Dow Transports) Print All-Time Record Highs; Dow Theory Confirmation; Fed Chair Yellen Hospitalized and Released

US stock and bond markets will trade in a shortened session today closing early for the Independence Day holiday. US markets are closed tomorrow and will resume trading on Wednesday.

US futures begin the new week of trading on the positive side. S&P +3. Dow +30. Nasdaq +10. Australia’s ASX 200 futures are up +0.4%. South Korea’s exports surge nearly 14% maintaining a robust pace. Imports are up +18%. Interestingly, exports to China and Europe are strong but shipments to the United States decrease.

Euro 1.1423. Euro/yen 128.31. Dollar/yen 112.32. Pound 1.3022. Euro/pound 0.8773. Mexican peso 18.0913. Canadian dollar 1.2968. Dollar/yuan 6.7809. Indian rupee 64.5813. Aussie dollar 0.7693.
WTIC oil 46.26. Brent oil 48.89. Natty 2.95. Gold 1242. Silver 16.64. Copper 2.95.

Japan is dealing with the negative news on the weekend that PM Abe’s LDP party loses seats in government. The yen strengthens (dollar/yen currency pair number moves lower) after the weekend elections. Dollar/yen 112.26. There is a lack of wage growth and inflation in Japan.

The Japan Tankan Survey reports the big manufacturing index at +17 beating the +15 expected. Manufacturing activity is improving in Japan and companies are more optimistic. Capex spending is up +8.0% better than the +7.2% expected. This good news overshadows the negativity from the election. Dollar/yen 112.34.

Aussie and Asia stocks begin the trading week marginally higher. NIKK +0.2%. ASX 200 +0.2%. KOSPI +0.1%. In Japan, Toshiba sinks -3.4%.

The China Caixin PMI, a measure of smaller manufacturing businesses in the communist nation, is back in expansion territory above 50 at 50.4 beating the 49.5 expected. The Aussie dollar moves lower to 0.7671. The official Chinese government PMI also beat expectations two days ago so the news is happy and the Pacific theater stocks are bid higher sans Australia. The RBA is providing a rate decision tomorrow creating angst in the land down under.

The bond connect program begins where Hong Kong investors are permitted to invest in Chinese fixed income markets. The bond connect activity is off to a slow start. Investors are concerned that China may not be able to handle the liquidity needed if the bond market experiences trouble.

Hong Kong gaming revenues rise +26% in June at the lower end of the forecasted range. Sands China -1.5%. Wynn Macau -2.7%. Melco rolls snake eyes losing -3.6%.

The yen weakens during the session providing lift in the Nikkei Index. Dollar/yen 112.58. Euro 1.1405. USD 95.76. WTIC oil 46.29. Brent oil 48.99.

Asia stock indexes print marginal gains but Australia is the skunk at the garden party. The NIKK ends the session up +0.1% to 20056 maintaining the 20K level. The SPASX200 loses -0.7% to 5684. South Korea’s KOSPI gains +0.1% to 2394. The SSEC gains +0.1% to 3195. The HSI gains +0.1% to 25781.

The India trading session continues with the Nifty up 90 points, +1%, to 9612. The BSE Sensex gains +1% to 31229. India’s new GST (goods and services) tax program begins and is off to a confusing start. Some India businesses are closed today since they are unsure as to how to handle the new paperwork. Uncertainty may temporarily hurt the economy. European futures point to a +0.6% rise in the DAX and CAC and +0.2% for the FTSE.

S&P +5. Dow +40. Nasdaq +17. Trading volume in the States should be light today for the shortened session and ahead of the holiday tomorrow which should keep trading volumes low in Europe.

Euro 1.1407. Dollar/yen 112.54. Pound 1.3004. Dollar/yuan 6.7895. Aussie dollar 0.7668. WTIC 46.20. Brent 48.89. Natty is down -2.5% to 2.96. Gold is down 5 dollars to 1236. Silver 16.59. Copper 2.71.

Treasury yields are; 2-year 1.39%, 5-year 1.90%, 10-year 2.32%, 30-year 2.85%. The 2-10 spread is 93 bips.

Saudi Arabia and other Arab nations imposing sanctions against Qatar are giving the nation two extra days to meet requirements to reduce terrorism. If Qatar does not meet the extended deadline more sanctions are likely. The situation creates more angst and instability in the Middle East.

At 3:00 AM EST (8 AM London; 9 AM Frankfurt), European indexes begin trading higher. DAX +0.6%. CAC +0.7%. FTSE +0.4%. SMI +0.5%. OMX +0.6%. Sector-wise, financials lead the party up +0.5%, energy gains +0.6%, materials and industrials rally +0.4% and consumer discretionary is up +0.3%.

Banks jump at the open. HSBC lead higher up +2%. BNP Paribas +1.2%. Banco Santander +1.2%. Wind energy king Vestas gains +3.6%. Subsea 7 gains +2.666%. Total rallies +1.3% after signing an oil field deal with Iran. Royal Dutch Shell +0.8%. BNP +1.2%. EDF +0.6%. Gemalto gains +5.2% as takeover talks continue. Bayer loses -0.8%. Reckitt Benckiser -0.5%. Diageo loses -0.4%. Christian Dior -2%. Shire -0.4%. Severn Trent -1.8%.

S&P +6. Dow +47. Nasdaq +18. Russell +1. VIX 11.08.

Euro 1.1407. Net long positions in the euro are at record highs. Euro/yen 128.40. Dollar/yen 112.56. Pound 1.3011. Euro/pound 0.8767. Mexican peso 18.1355. Canadian dollar 1.2982. Dollar/yuan 6.7887. Indian rupee 64.74. Aussie dollar 0.7677. USD 95.83.

WTIC oil 46.32. Brent oil 49.01. Natural gas 2.96. Gold 1236. Silver 16.59. Copper 2.7085.

Treasury yields are; 2-year 1.39%, 5-year 1.89%, 10-year 2.31%, 30-year 2.84%. The 2-10 spread is 92 bips. European 10-year yields are; UK 1.29%, France 0.82%, Germany 0.48%.

Italy says elections may not occur this year and the February-May 2018 time period appears more likely. Italy PMI Mfg Index is 55.2 missing the 55.3 expected by a hair.

At 3:37 AM EST (8:37 AM London), European indexes maintain and expand their gains. The oil and gas companies and banks create joy to begin the trading week. DAX +0.7%. CAC +1%. FTSE +0.5%. MIB +0.9%. IBEX +0.7%. PSI +0.7%. European Stoxx 600 Index +0.666%.

US futures move higher as volatility drops. S&P +8. Dow +68. Nasdaq +23. Russell +3. The VIX slips under 11 to 10.92. Market bulls rule the stock market with the VIX under 11. The Nifty is up 85 points at 9606 maintaining the 9.6K level.

The euro slips under 1.14 to 1.1396. Euro/yen 128.55. Dollar/yen 112.80. Pound 1.3007. Euro/pound 0.8761. Mexican peso 18.1363. Canadian dollar 1.2987. Dollar/yuan 6.7875. Indian rupee 64.75. Aussie dollar 0.7666. USD 95.83.

German PMI Mfg Index is 59.6 above the 59.3 expected a very robust number. Germany is the economic engine of Europe. The Euro-area PMI Mfg Index is 57.4 a hair better than the 57.3 expected.

At 4 AM EST, S&P +8. Dow +60. Nasdaq +21. Russell +3. VIX 10.94. DAX +0.6%. CAC +0.9%. FTSE +0.5%. European stocks and US futures are off to a solid start this week.

At 4:30 AM EST (9:30 AM London), UK June Mfg PMI drops to 54.3 missing the 56.3 expectation by a mile. The pound drops to 1.2975. DAX +0.7%. CAC +1.2%. FTSE +0.6%. France is leading Europe higher.

At 5:30 AM EST, S&P +8. Dow +67. Nasdaq +20. Russell +3. VIX 11.00. DAX +0.7%. CAC +1%. FTSE +0.5%. The Nifty is up 93 points at 9614 heading towards a happy close.

Euro 1.1384. The euro drops and yen moves higher. Euro/yen 128.49. The euro/yen pair is a gauge on the ECB versus BOJ monetary policies. Dollar/yen 112.87. Pound 1.2970. Euro/pound 0.8777. Mexican peso 18.1611. Canadian dollar 1.299. Dollar/yuan 6.7931. Indian rupee 64.73. Aussie dollar 0.7662.

Oil remains buoyant. WTIC 46.14. Brent 48.79. Natty 2.98. Gold is down 6 dollars to 1236. Silver loses -0.6% to 16.54. Copper 2.69.

Treasury yields are; 2-year 1.39%, 5-year 1.90%, 10-year 2.32%, 30-year 2.85%.

At 6 AM EST, oil turns negative. WTIC 46.03. Brent 48.68. Gold 1234. Silver 16.52. Copper is down -0.666% to 2.693.

DAX +0.7%. CAC +1%. FTSE +0.4%. Italy jumps higher. MIB +1.5%. IBEX +0.9%. PSI +0.4%. The party across the pond continues with Italy, France and Spain leading higher while Germany, London and Portugal print modest gains. Switzerland and the Nordic states are joyous. SMI +0.8%. OMX +0.9%.
Euro 1.1373. Dollar/yen 112.96. Pound 1.2968. Aussie dollar 0.7657.

The Nifty finishes the session up 94 points, +1%, to 9615.

The major auto manufacturers begin reporting Motor Vehicle Sales numbers. Honda auto sales gain +0.8% above the +0.5% expected. General Motors and Ford each report a -5% drop in sales. Fiat Chrysler reports a -7% drop in auto sales. The data indicate that the ‘peak auto’ scenario is likely occurring. Sales of SUV’s and pickup trucks remain encouraging. Despite the weak sales data, the car makers rally in the pre-market. Trader’s likely figure the data could have been much worse. GM gains +2.3%. F +3.2%. FCAU +4%.

Tesla CEO Musk says the Model 3 electric car passes regulatory hurdles and will reach a production of 20K cars per month. TSLA is up +2.9% in the pre-market.

Former presidential candidate and libertarian Ron Paul (father of republican Rand Paul currently serving in the Senate) says, “It will not be a total shock if stocks plummet -25% and gold soars +50% by October.” Ron Paul continues to criticize the Federal Reserve and has long called for an audit of the independent organization.

At 9:30 AM EST, US stocks begin trading gapping higher. The SPX immediately pops 12 points to 2436 in the opening minutes. The Dow is up over 100 points. The VIX is well under 11 so the market bears are slapped around.

The US banks run higher following the lead in Europe. The European Banking Index is up +2.6%. Carmakers are joyous after the weak sales data. Go figure. GM +2.7%. F +3.6%. FCAU +4.2%. TSLA +1.9%.

The US PMI Mfg Index is 52.0 missing the 52.2 expected and below the prior 52.7. New Orders are slowing and employment is softening. Output retreats. Nonetheless, businesses remain very confident about the future of the economy.

At 10 AM, the ISM Mfg Index is 57.8 a big beat above the 55.1 expected and prior 54.9. The PMI and ISM provide conflicting data sets. The employment component is the highest in six years. New Orders, Backlogs and Production numbers are strong.

Construction Spending is flat at 0% month-on-month versus the expected +0.5% and the prior revised-higher -0.7%. Year-on-year is up +4.5% versus the prior revised-lower +5.5%.

The S&P 500 is up 15 points, +0.6%, to 2439. The Dow Industrials gain 160 points, +0.8%, to 21510 above the 21.5K level. The Nasdaq leaps 27 points, +0.4%, to 6166.66. The Russell 2000 small caps gain 7 points, +0.5%, to 1423. VIX 10.37.

European stocks catch a stronger bid after the US open. The DAX jumps +1.2% higher. CAC +1.4%. FTSE +0.7%. SMI +1.2%. OMX +1.4%. European Stoxx 50 Index +1.5%.

Euro 1.1371. Euro/yen 128.73. Dollar/yen 113.20. Pound 1.2949. Euro/pound 0.8781. Indian rupee 64.875. Mexican peso 18.1743. Canadian dollar 1.2982. Dollar/yuan 6.789.

WTIC oil is up for eight consecutive days gaining +1.1% to 46.55. Brent oil gains +1% to 49.25. Higher oil prices drive energy stocks higher. Traders are bidding oil higher based on the oil rig data that reports a 2 rig decrease last Friday. XLE +1%. Natty gas is up +0.5% to 3.05 losing the earlier weakness. Gold collapse 15 dollars, -1.2%, to 1226. Silver is down -2.3% to 16.24. Copper 2.702.

Treasury yields are; 2-year 1.40%, 5-year 1.91%, 10-year 2.32%, 30-year 2.85%. The 2-10 spread is 92 bips.

The banks, energy stocks and carmakers send the major US stock indexes higher. Bullish traders are buying the carmakers with both hands. FCAU +4.1%. F +3.3%. GM +1.8%. TM +1%. Tesla moves the other way as questions remain whether Tesla can ramp up the production with the new Model 3 as fast as CEO Musk proclaims. TSLA drives into a ditch losing -2.5%. Hyundai reports a drop in car sales. Nissan auto sales are up +2% year-on-year. This year’s overall auto sales number disappoints down -2.1% compared to the first six months of last year.

European indexes end the session with a big rally across the board. The DAX gains 150 points, +1.2%, to 12475. The CAC gains 75 points, +1.5%, to 5196. The FTSE gains +0.9% to 7377. Italy’s MIB explodes 429 points higher, +2.1%, to 21013. The IBEX jumps 160 points, +1.5%, to 10604. The PSI gains +0.5% to 5180. It may be the Independence Day holiday in the States, but the fireworks are occurring in Italy, Spain and France.

Energy stocks are on fire. XLE +1.9%. BHI +5.8%. RIG +5.3%. NBR +6%. BHI +5.8%. DOV +2.2%. Energy and the banks lead the Dow Industrials Index higher. CVX +1.9%. XOM +1.7%. GS +2.4%. JPM +2%. Chemical king DD gains +1.8%. The Dow losers are Mr Softy and Intel. MSFT -1.1%. INTC -0.8%. Money is taken off the table in Nike, Visa and Caterpillar. NKE -.6%. V -0.5%. CAT -0.5%.

KIM +5.1%. CF +4.5%. GPS +4.2%. JBHT is trucking +2% higher. VIAB +1.6%. PCAR +1.5%. DISCA +1.4%. C +2.1%. MET +2.2%.

Tech and especially chip stocks are hammered. XLK -0.7%. SOX -1.4%. WDC -3.7%. NVDA -3.6%. MU -2.4%. AMD -2.6%. XLNX -1.6%. SYMC -2.8%. ARAY -3.2%. Toy maker MAT drops -2.5%.

Technician Tom McClellan says the uptrend in the stock market will continue for another year. McClellan says the market breadth is very strong pointing to more gains in the stock market. McClellan says stocks will also run higher based on the expected July positive seasonality. He says that markets will not sell off any significant amount until next year when he expects stocks to top out in mid-2018. He says the stock market will be ugly in late 2018 and 2019. McClellan proclaims that no one has to worry about the stock market for another year and stocks will continue to rally.

The bullish prognostications continue with the vast majority of market participants forecasting big stock market gains going forward. Interestingly, the McClellan Oscillator, NYMO, Tom McClellan’s indicator, has remained above the -30 level since early March, now at +18, and needs to retrace far lower (down to -40 to -100) to provide a proper bottom to enter long for a short term trade. This interpretation of the NYMO flies in the face of McClellan’s bullish forecast.

In addition, the VIX is at 11 signaling ongoing fearlessness in the markets. Traders are not expecting any significant pullback to occur for stocks. The CPCE put/call ratio remains low at 0.55 indicating rampant complacency in the markets. The central bankers have trained investors and traders to simply remain long the stock market since they will always step in to save the day and protect the wealthy elite class that own large stock portfolios. The central bankers are the market.

Euro 1.1357. Euro/yen 128.78. The yen remains weak sending the dollar/yen currency pair higher to 113.38. Pound 1.2937. Euro/pound 0.8779. Mexican peso 18.1967. Canadian dollar 1.3003. Dollar/yuan 6.8003. Indian rupee 64.875.

WTIC oil gains +2.2% to 47.05. Brent oil is up +1.8% to 49.65. Natty slips -2.9% to 2.95. Natural gas is trading all over the map. Gold tanks 20 dollars, -1.6%, to 1221. Silver slips -3.1% to 16.11. Copper is down -0.7% to 2.69.

Treasury yields are; 2-year 1.41%, 5-year 1.93%, 10-year 2.35%, 30-year 2.87%.

At 1 PM EST, US stocks finish the session mixed with the S&P 500, Dow Industrials and Russell 2000 higher and the Nasdaq Composite lower on thin volume. The Dow Industrials, INDU or DJI, threaten to print a new all-time closing high but price retreats into the closing bell. The Russell 2000 prints a new all-time closing high.

The SPX finishes 6 points, +0.2%, to 2429. The INDU finishes up 130 points, +0.6%, to 21479. The COMPQ loses 30 points, -0.5%, to 6110. The NDX tanks 50 points, -0.9%, to 5596. The RUT gains 11 points, +0.8%, to 1426.68 a new all-time closing higher. The Russell 2000 did not print a new all-time high. The HOD is 1429.37 and the all-time record high is 1433.79 from 6/9/17. The VIX moves above 11 to 11.22.

Trannies gap higher today. TRAN gains +0.8% to 9639.63 a new all-time record high and 9681.88 a new all-time high. The Dow Transports have recovered all the losses during March, April and May and confirm the new all-time highs on the Dow Industrials from 6/19/17 from a Dow Theory perspective. The Dow Theory confirmation signals more upside for stocks ahead.

Trading volume is anemic. It is easy to push the jello around the plate with low volume. Today is the lowest volume day for the stock market this year.

After the closing bell, the Federal Reserve says Chair Yellen is released from a hospital stay over the weekend in London due to a urinary tract infection. Yellen is 70 years old. Yellen had to be helped off the stage one year ago after she became faint during a speech.

SpaceX delays a Falcon 9 rocket launch for the second time. The countdown had started and the launch was aborted with only five seconds remaining before liftoff. The rocket is carrying satellites for deployment in space. CEO Elon Musk says the rocket will launch Wednesday or Thursday.

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