Tuesday, July 11, 2017

WEDNESDAY 7/12/17; Japan PPI (Producer Price Index); BOC Rate Decision; FAST; Federal Reserve Chair Yellen Testifies Before House Financial Services Committee; US 10-Year Note Auction; Beige Book; INDU (Dow Industrials; DJI) and TRAN (Dow Transports; DJT) Print All-Time Highs; Dow Theory Confirmation Continues

S&P +1. Dow +11. Nasdaq -1. WTIC oil is up +1.6% to 45.78 after the API Oil Inventories report a huge draw down a few hours ago. Brent oil 48.19. Natty 3.04. Gold 1218. Silver 15.82. Copper 2.676.

Japan’s June PPI is higher than expected at +2.1% versus +2.0% expected. JPM CEO Dimon says the unwinding of the Federal Reserve’s balance sheet may prove difficult. A couple weeks ago Dimon bragged that the world’s economy was doing great and would continue along on a robust and optimistic path.

Aussie and Asia stocks begin trading flat to marginally lower. Trading volume should be light ahead of Fed Chair Yellen’s testimony later in the States. The NIKK drops -0.3% and Topix is down -0.2%. The ASX 200 loses -0.1%. Healthcare and financials are weak. The KOSPI gains a smidgeon +0.1%.

Euro 1.1474. Dollar/yen 113.80. Pound 1.2857. USD 95.68.

Treasury yields are; 2-year 1.37%, 5-year 1.91%, 10-year 2.36%, 30-year 2.92%. The 2-10 spread is at 99 bips. German bund 0.55%. Japan 10-year JGB yield 0.093%. BOJ Governor Kuroda is wiping beads of sweat from his forehead since he is using the power of the central bank to hold the line at 0.10%. Kuroda knows the global central banker game is spinning out of control but there is no choice except to keep printing money to keep yields low and pump stocks higher which rewards the wealthy.

The Fed Funds futures indicate a 17% chance of a Federal Reserve rate hike in November, 49% chance in December and 51% chance in January. The bond market thinks another rate hike from the Federal Reserve this year is a coin flip but the central bank keeps touting another hike.

The left-leaning media in the United States, which accounts for about 70% of the news, labels the Donald Trump, Jr, email and Russia meeting potential scandal as “Russia-gate.” So far, the story does not indicate that Trump, Jr, did anything wrong but the bad publicity will hamper President Trump’s agenda. Republicans and democrats up for election in November 2018, only 16 months away, are becoming concerned about their campaigns which is a new dimension of complexity the orange-headed president must juggle.

The Asia session is quiet ahead of Fed Chair Yellen’s testimony in a few hours. The stock indexes trend lower. BOJ Governor Kuroda has gone mad. The Bank of Japan plans to buy 330 billion yen of 3 to 5-year government debt as compared to 300 billion yen previously. The BOJ is increasing purchases of 3 to 5-year notes and continues buying 500 billion yen of 5 to 10-year notes. The central bankers are the market.

The NIKK ends the session down -0.5% to 20098. The SPASX200 sinks -1% to 5674. The KOSPI drops -0.2% to 2392. The SSEC retreats -0.2% to 3198. Hong Kong’s Hang Seng Index is the big winner on the session up +0.6% to 26044 above the 26K level. The Nifty is up 20 points at 9807 as trading continues in India.

Brazil passes labor reform which his encouraging for the troubled nation dealing with an economic and political crisis. The labor reform package is a win for embattled President Temer and his administration. Brazil real 3.2545. Brazil is corrupt from top to bottom in government and business.

Amazon says over three times as many Echo speakers were sold during Prime Day than the previous year. CEO Bezos was practically giving them away. Amazon says that Prime Day set records but firm numbers are not yet provided. The main goal of the shopping day was to promote the Echo.

At 3:00 AM EST (8 AM London; 9 AM Frankfurt), European indexes begin trading higher making up for the slump into the close yesterday after Donald Trump, Jr, released email documents concerning a Russian meeting. US stocks collapsed from 11:09 AM EST to 11:30 AM EST but recovered all the losses by 2 PM EST. The European indexes closed at 11:30 AM EST (4:30 PM London; 5:30 PM Frankfurt) and did not have a chance to recover until now.

DAX +0.4%. CAC +0.5%. FTSE +0.666%. SMI +0.4%. OMX +0.5%. Retailer B&M European Value leaps +5.1% higher. AMEC Foster Wheeler is whacked -5% on news of possible bribery and corruption charges pending. Traders are selling first and asking questions later.

Burberry jumps +4.2% on strong sales and earnings. Luxury goods remain a hot sector since the central bankers pump stock markets higher making the wealthy filthy rich; the privileged class has to spend their huge profits on something. Fidelity cuts 1500 workers trying to keep the event low-key. Most are ushered out the door with early retirement packages.

S&P -1. Dow +8. Nasdaq -1. Russell +1. VIX 10.84. The Nifty is up 18 points at 9804 holding the 9.8K level.

Euro 1.1464. Euro/yen 130.18. Dollar/yen 113.56. Pound 1.2822. Euro/pound 0.8941. Mexican peso 17.9072. Canadian dollar 1.2906. Dollar/yuan 6.7901. Indian rupee 64.5225. Aussie dollar 0.7645.

WTIC oil rallies +2% to 45.93. Brent oil is up +1.7% to 48.33. Natty 3.03. Gold 1218. Silver 15.80. Copper 2.68.

Treasury yields are; 2-year 1.37%, 5-year 1.91%, 10-year 2.36%, 30-year 2.92%. The German bund breaks through the 0.60% level with the Deutschland’s 10-year yield at 0.61%.

At 4 AM EST (9 AM London), S&P +1. Dow +10. Nasdaq +2. Russell +1. VIX 10.77.

Treasury yields are; 2-year 1.36%, 5-year 1.90%, 10-year 2.35%, 30-year 2.92%.

China announces new yuan loans at 1540 billion yuan compared to the 1300 billion yuan expected. WTIC oil 45.96. USD 95.79. Nifty 9802.

DAX +0.5%. CAC +0.666%. FTSE +0.8%. MIB +0.8%. IBEX +0.5%. PSI +0.6%. London and Italy lead the upside party across the pond.

At 4:30 AM EST (9:30 AM London), UK March to May wage growth is +2.0% beating the +1.9% expected but remaining at lows not seen since the 1970’s. Pound 1.2857.

British oil giant BP is basing future business on a $50 oil price for the next five years. IMF Managing Director Lagarde says, “I would not rule out another financial crisis.”

The Bank of Canada is announcing its rate decision in a few hours and analysts think the BOC may hike the key rate for the first time since September 2010. A quarter-point hike would raise the key rate to 0.75%. The Canada 2-year yield is at 1.12%. Canada 10-year yield 1.85%. Canadian dollar 1.2928.

At 5 AM EST, S&P +1. Dow +2. Nasdaq -1. Russell flat. VIX 10.78.

DAX +0.5%. CAC +0.7%. FTSE +0.666%. The Nifty is up 24 points at 9810.

Euro 1.1459. Euro/yen 129.96. Dollar/yen 113.42. Pound 1.2851. Aussie dollar 0.7647.

WTIC oil 45.76. Brent oil 48.18. Natural gas 3.02. Gold 1219. Silver 15.81. Copper is up +0.6% to 2.6875 which will support the stock market.

Treasury yields are; 2-year 1.36%, 5-year 1.90%, 10-year 2.34%, 30-year 2.91%. The 2-10 spread is 98 bips after tagging 100 bips briefly yesterday. German bund 0.60%.

Oil is on the move higher. WTIC 45.84. Brent oil 48.26. EIA Oil Inventories are released in about five hours. USD 95.75.

At 6 AM, S&P +3. Dow +24. Nasdaq +10. Russell +2. VIX 10.61.

DAX +0.6%. CAC +0.9%. FTSE +0.9%. OMX (Nordic stocks) +1.1%. The Nifty finishes up 30 points at 9816. The BSE Sensex finishes up +0.2% higher to 31805.

Treasury yields are; 2-year 1.36%, 5-year 1.89%, 10-year 2.34%, 30-year 2.91%.

US Mortgage Applications collapse -7.4%. Higher rates dampen mortgage activity. Mortgage loan applications are down -3% on-week. Refi’s tank -13%.

OPEC says demand for crude will be below its current projections. Oil prices remain elevated despite the news. WTIC oil is up +1.666% at 45.79.

S&P +5. Dow +32. Nasdaq +17. Russell +3. VIX 10.55.

FAST leaps +7%  on earnings. Twitter names a new CFO. TWTR gains +0.3% adding to yesterdays +3.1% rally. AMZN is trading marginally higher as Prime Day is assessed. PYPL rallies +3.5%.

At 8:30 AM EST, Fed Chair Yellen releases her remarks to the House ahead of time. Yellen says the Fed will begin unwinding the massive balance sheet later this year. Yellen does not provide any commitment on the path of interest rates ahead.

Yellen says the Federal Reserve is monitoring inflation closely. She expects the lull in inflation to end later this year. She says moderate economic growth continues. Yellen says the labor markets are improving as well as consumer spending and business investment. Yellen repeats the same recent themes from the Fed. She will testify in 90 minutes.

S&P +7. Dow +64. Nasdaq +26. Russell +5. VIX 10.50. Traders are focused on a key comment from Yellen’s remarks that says ‘the Fed may not need to hike rates much more’. Bingo. Yellen, Queen of the Doves, flaps her dovish wings and futures and stocks begin ramping higher. The central bankers are the market.

DAX +0.8%. CAC +1.1%. FTSE +0.9%. RBS rallies +2.7% on news that a settlement is reached with the courts over past nefarious behavior. Banks always rally on court settlements. MIB +1.1%. SMI +1%. OMX +1.3%.

Euro 1.1471. Dollar/yen 113.24. Pound 1.2892. Aussie dollar 0.767.

WTIC 45.74. Brent 48.15. Natural gas 3.01. Gold 1218. Silver 15.83. Copper 2.6925.

Treasury yields are; 2-year 1.35%, 5-year 1.88%, 10-year 2.33%, 30-year 2.90%. German bund 0.53%. Japan 10-year yield 0.089%. UK gilt 1.27%.

US futures and European indexes are running higher after the release of Yellen‘s dovish comments. S&P futures are +9 then +10 then +11. Dow +108. Nasdaq +44. Russell +9. VIX 10.26.

DAX +1.1%. CAC +1.3%. FTSE +1.2%. OMX +1.4%.

Treasury yields are; 2-year 1.34%, 5-year 1.86%, 10-year 2.31%, 30-year 2.90%.

President Trump’s chief economic advisor Gary Cohn is said to have the inside track at the top job at the Federal Reserve. Yellen’s term ends in January and Trump will likely not have her stay on. Former Goldman Sachs executive and loyalist Cohn would be glad to step into Yellen’s shoes. He will take care of the investment banks and make sure they make lots of money at the expense of everyone else. Isn’t America great?

At 9:30 AM EST, US stocks gap higher. Traders are in party mode and the stock market atmosphere is euphoric. The TICK tags +1200 verifying the exuberance for stocks. The S&P 500 launches 13 points, +0.5%, to 2438. The Dow gains 93 points to 21501. The Nasdaq composite is up 47 points, +0.8%, to 6240. The Russell 2000 small caps gain 8 points, +0.6%, to 1421. The VIX is at 10.44 with low volatility sending stocks higher.

The Dow Jones Industrials, Dow Jones transports and Russell 2000 are near all-time record highs. VIX 10.41. WTIC oil gains +2.4% to 46.12. Brent oil 48.46. Natty 3.00. Gold is up 5 bucks to 1223.  Silver 15.95. Copper 2.692.

Energy stocks are joyous. XLE +1%. XOM +0.8%. CVX +0.9%. COP +1.4%. SLB +1%. RIG +3%. APA +1.9%. MRO +1.6%. CHK +2.1%. CAT bulldozes to a new record high up +1.3%. FAST +3.5%. TWTR +3.4%. SQ +1.2%. PYPL +2%. GE +0.9%. HOG -1.4%. SOX +1.1%. XLK +0.8%. MU +0.7%. NVDA +0.8%.

Treasury yields are; 2-year 1.34%, 5-year 1.86%, 10-year 2.31%, 30-year 2.88%. The 2-10 spread is 97 bips.

Stocks are strong. SPX 2440. INDU 21526. AMZN is up +1% to 1004 boasting that Prime Day was the largest sales day in Amazon history.

DAX +1.5%. CAC +1.666%. FTSE +1.1%. MIB +1.3%. IBEX +0.9%. PSI +0.8%.

Euro 1.1422. Euro/yen 129.13. Dollar/yen 113.06. Pound 1.2878. Euro/pound 0.887. Indian rupee 64.54. Mexican peso 17.7598. Canadian dollar 1.2924. Dollar/yuan 6.7878.

SPX 2441. INDU 21535. COMPQ 6240. RUT 1425. The VIX prints a LOD at 10.08 near a 9-handle. Stocks are joyful.

At 9:51 AM, the Dow prints a new all-time record high at 21581. The Dow Transports are not yet printing a new all-time high but is very close.

At 10 AM, Fed Chair Yellen provides the semiannual testimony before the House Financial Services Committee. She reads her remarks released 90 minutes ago saying monetary policy is not on a preset course. Yellen says the balance sheet is to shrink appreciably beginning later this year. She says the Federal Reserve is carefully monitoring inflation.

Stocks continue higher as Yellen, Queen of the Doves, continues speaking and taking questions. The Federal Reserve appears in no rush to raise rates even though another hike is on the table for this year. The dovishness sends equities higher.

SPX 2443. COMPQ 6245. Euro 1.1404. Dollar/yen 113.35. USD 95.86.

Treasury yields are; 2-year 1.36%, 5-year 1.88%, 10-year 2.33%, 30-year 2.90%.

At 10:30 AM, EIA Oil Inventories are a big 7.6 million barrel build verifying the API inventory data last evening. Oil prices should rally. Gasoline Inventories are a draw down. WTIC oil launches +2.666% to 46.25. Brent oil gains +2% to 48.47. Natural gas is down -1.7% to 3.00. VIX 10.32.

Treasury yields are; 2-year 1.35%, 5-year 1.87%, 10-year 2.32%, 30-year 2.89%.

The Bank of Canada decides to hike its key rate by one-quarter point to 0.75% the first hike in seven years. The BOC turns hawkish. Canadian dollar l.2832.

European indexes end the session in rally mode. The DAX jumps 190 points, +1.5%, to 12627. The CAC gains 82 points, +1.6%, to 5222. The FTSE gains 87 points, +1.2%, to 7417. The MIB is up 320 points, +1.5%, to 21432. The IBEX gains +1.1% to 10560. The PSI finishes up +0.8% to 5215. Germany, France and Italy launch into the stratosphere today. Ditto Switzerland and the Nordic stocks. SMI +1.6%. OMX +1.8%.

At 1 PM, the 10-Year Note Auction goes off at 2.325%. Yellen says, “The federal funds rate would not have to rise all that much further to get to a neutral policy stance.” The stock market will remain elevated on the dovish talk.

At 2 PM, the Beige Book says wages are rising but only at a modest to moderate pace. The Federal Reserve says economic growth is slight to moderate across all 12 regions. The lackluster report is the weakest Beige Book of this year. This will reinforce the idea that the Fed may be in no rush to hike rates. Stocks continue higher towards new record highs. The central bankers are the market.

Fed’s George says the process of unwinding the massive balance sheet should begin in the near future and sooner rather than later. The comments are not surprising since she is a hawk.

Stocks rally after Yellen appears unsure about inflation occurring and willing to implement rate hikes very slowly and gradually. In other words, the easy money parade continues and equities pop higher rewarding the wealthy elite class that own large stock portfolios. As the privileged class is singing songs and carrying on, the huddled masses struggle along, working for low wages far too long.

Emerging market stocks catch a strong bid. The EEM ETF jumps +2% printing at multi-year highs. The Dow Industrials and Dow Transports are printing new all-time record highs.

ATVI +5.2%. AAL soars +4.2% at a two-year high. UAL +4.7%. Chip favorite NVDA gains +4.3%. PYPL is up +3.3% printing a record high. SQ +3.1%. MELI +4.6%. SYK +2.7%. MSFT +1.7%. HD +1.3%. MCD +1.1%. INTC +1%.

Energy stocks are higher. XLE +0.3%. XOM +0.5%. NRG is the top performer catapulting +29.4%.
GWW -4.4%. WW Grainger provides lots of small parts and needs for manufacturers so the drop in today’s trading is worrisome. DE, a key equipment provider, sinks -3.6%. No one is concerned since they are too busy drinking Fed wine and buying stocks.

CTL -3.2%. HOG -3.2%. FCX -2.5%. BMRN -1.5%. BAC -1%. JP Morgan Chase is down in the up tape. JPM -0.3%.

RTN is up +0.3% printing at record highs as Raytheon cranks up the missile production. Defense stocks run higher today. GD +0.6%. NOC +0.5%. REIT’s are rallying. VNO +1.2%. SPG +1%. Utilities are strong. XLU +0.9%.

Stocks remain elevated during the last one hour of trading. SPX 2445. The Dow as up 171 points at the high but now up 137 points. INDU 21546. The Nazzy Composite gains 65 points. COMPQ 6259. RUT 1423. VIX 10.22. The bulls are cruising to victory today.

Euro 1.1414. Euro/yen 129.29. Dollar/yen 113.27. Pound 1.2882. Euro/pound 0.886. Indian rupee 64.54. Mexican peso 17.7846. The peso strengthens. Canadian dollar 1.2730. The loonie strengthens after the BOC rate hike. Dollar/yuan 6.7878. Brazil real 3.2086.

Treasury yields are; 2-year 1.35%, 5-year 1.88%, 10-year 2.32%, 30-year 2.89%. The 2-10 spread is 97 bips. German bund 0.58%. Italy 10-year yield 2.25%. Spain 10-year 1.64%. UK gilt 1.26%.

The US dollar index drops so commodities pop sans the ags. USD 95.75. WTIC oil 45.44. Brent oil 47.71. Gold 1220. Silver 15.89. Copper 2.6825.

The wheat crop is at better yield levels than forecast so wheat drops -3%. The corn crop is in good shape and well past knee-high for the fourth of July. Corn is boiled -4%. Farmers will adjust the amount of wheat versus corn they grow. Soybeans are down -0.9%.

US stocks finish the session in rally mode with new record highs for the Dow Industrials and Transports. The SPX finishes up 18 points, +0.7%, to 2443. Price gaps higher at the opening bell jumping above the 20-day MA at 2432.

The Dow Jones Industrials are up 123 points, +0.6%, to 21532.14 a new all-time record closing high and 21580.79 a new all-time high. Trannies print a new record high as well providing a Dow Theory confirmation of more upside ahead for equities. TRAN gains 117 points, +1.2%, to 9716.32 a new all-time closing high and 9727.62 an all-time high. Everything is going the bulls way of course with the rich central banker’s thumbs on the scale.

The COMPQ finishes up 68 huge points, +1.1%, to 6261. The NDX gains 69 points, +1.2%, to 5779. The RUT gains 11 points, +0.8%, to 1424 only 2 points from an all-time closing high. The HOD is 1431.34 also only a couple points from an all-time high. The NYA finishes up 81 points, +0.7%, to 11826 within 10 points of a record closing high. The NYSE Composite HOD is 11846.00 only 25 points from a record all-time high.

After the closing bell, BOX gains +1.1% after hiring a new COO Stephanie Carullo from Apple. The cloud storage company will receive a feather in its cap for placing and keeping a woman in the executive suite. Silicon Valley and the technology companies remain stacked floor to ceiling with men and are making efforts to keep and place women in more key positions.

President Trump comments on the healthcare bill in the Senate proclaiming, “I will be angry” if the Senate (under McConnell’s leadership) does not pass the Obamacare replacement bill. Trump comments on his meeting with Putin at the G20 Summit saying, “We get along very, very well.”

The president says he was not aware that his son Donald, Jr, had met with the Russian lady last summer during the campaign. President Trump and the First Lady fly to Paris to participate in the Bastille Day celebrations. In true braggadocio fashion, the orange-headed President Trump, a carnival barker at heart, proclaims, “I have done more in five months than practically any president in history.”

CNBC television personality Jim Cramer takes Wedbush analyst Michael Pachter to task for remaining bearish on Netflix as the NFLX stock has traveled ever higher. Pachter admits he has been wrong with his sell call for the last three years but the sell call remains. Cramer says that Netflix cannot be valued using traditional metrics and Pachter remains wrong. Cramer is a raging bull on the stock advising folks to own a chunk of NFLX.

Interestingly, the monthly chart of NFLX is ominous. A rising wedge pattern is in play (bearish) with negative divergence occurring across the chart indicators. Netflix is very likely placing a multi-year top at anytime and equally important the other tech heavyweights display similar chart behavior.

AAPL, NFLX and GOOGL will likely top out first on the monthly basis, perhaps now through October, with FB and AMZN following behind. Even though Pachter has been dead wrong on his sell call for NFLX, he will likely be correct moving forward. The FAANG stocks and other tech heavyweights are likely printing major multi-year tops this year as per the technical analysis from the monthly charts.

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