The collision of global markets and social mood

Wednesday, February 1, 2017

Wednesday -- Apple, Cash, Debt, Buybacks, Fed, Plus Euro-Zone Spreads

S&P E-mini Futures:
Up modestly.

Yesterday's chatter was that the Fed might drop one of their rate hikes scheduled for this year which put a bid under treasuries, precious metals, and equities, and inversely tanked the dollar.

Not seeing much confirmation of follow through thus far, but likely because of pre-Fed caution. We'll know more at 2pm today.

Here was the takeaway from Apple's earnings:

Euphoria despite growing skepticism that it's becoming an iPhone company, and that sales of iPod, iPad, iWatch, and Macs are losing momentum. The numbers seemed to dispute that, however.

But there's no disputing the fact that even as its cash hoard grows, so too is its debt. Basically Apple is raising debt to buy back stock.

So Apple is becoming a financial engineering company too.

Meanwhile, Spanish and Italian yields are well up again this morning.

And European yield spreads are widening ominously.

For example, the difference between the yield on 10-year Italian and German sovereign bonds has risen to 183 basis points from 155 basis points at the start of the year, as Bloomberg reported.

It's also happening with Spanish, Greek, and yes, even French yields.

Oh, but rising yields could encourage the ECB to curtail its stimulus because inflation is returning, they say, just when that light in the tunnel is an approaching train.

Again, rising yields in a debt-laden economy is not a sign that The Great Rotation into equities is here.

It's a sign that The Great Debt Liquidation is beginning.

CHF & JPY back to weakness -- maybe a bit of Risk On.

USD broke its 99.43 swing point from last December with heavy volume on the DX futures contract, yet not as much as the swing point, and open interest has been falling since the most recent high. Possible caution to dollar bears.

Volume exploded as prices rallied on yesterday's Fed rumor. Wait 'n' see mode thus far pre-Fed.

Very choppy multi-day range for WTI crude while NG goes wild. Continuation of NG upside reversal after getting crushed last several days.

Not as much enthusiasm just yet, though palladium remains the relative strength leader. Copper down.

S&P Outlook:
Not seeing the Apple euphoria translate into market euphoria just yet.

Yesterday's Fed rumor, however, did bring in the volume. NYSE volume (proxy-volume for the S&P 500 index which doesn't trade) exploded.

Today should be where the rubber meets the road.

This week's BOJ meeting was largely a yawn. And events in Europe might quickly force the ECB's hand at the worst possible time. So we'll see how the markets react to today's 2pm Fed statement.

Price should likely remain in the middle of two volume shelves cited yesterday: the 2294.50 area and the 2274 area.

The key metric could be volume and if it exceeds yesterday or not.

Also will be watching Apple. Last night's after-hours action was less than the expected move that options were pricing. It will be interesting to see how it acts in the bright lights of the regular session; it's looking pretty strong in the pre-market.

Apple has a weekly swing point at 123.82 with 195 million shares. Volume is far too light lately. Getting above 123.82 with lighter volume is not the end of the world. But a close below 123.82 on less than 195 million shares (weekly) could be a significant warning sign.

Kind of ironic that the Fed follows Apple today -- the horse behind the apple cart.

The Buyback Enabler after the Buyback King.

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