Keystone's Key Dates and Market Movers for the Week of 6-6-11 Forward

Keystone presents the following underlying market currents, sometimes subtle sometimes turbulent, that move global markets in real time.  The key dates and times below typically correspond to market pivot points.

The euro crisis and U.S. debt crisis figure prominently in June coming to a head the second and third weeks with meetings and demonstrations.  China rate hike should occur any time.

For the U.S. this week, lots of Fed talk each day so watch the wires for sudden snippets of news, especially Monday and Tuesday since the economic data does not ramp up until Wednesday and Thursday.  AAPL will set the tone for the week with the iCloud announcement and an appearance by Steve Jobs on Monday.  The 10-year note auction and Beige Book on Wednesday are market pivot points, also ECB news from Trichet, Jobless Claims and 30-year bond auction on Thursday.  We find out the final POMO schedule to close out QE2 this month on Friday afternoon.  Expect a volatile June.

D-Day is 6/6/11-we honor all veterans for their service.

Keystone’s ‘Short Term’ Key Dates and Market Movers Week of 6/6/11 and on:

·         Monday, 6/6/11:  Greek unemployment data.  AAPL announces iCloud with a Steve Jobs appearance--his last appearance three months ago for iPad2 release at share price of 352--which AAPL continues to trade underneath. Plosser speaks overnight Sunday at 3:30 AM EST.  3 and 6-month bill auctions 11:30 AM. Fisher speaks 5:30 PM.

·         Tuesday, 6/7/11: 4-week bill auction 11:30 AM, Lockhart speaks 12:30 PM, 3-year note auction 1:00 PM. Consumer Credit 3:00 PM. JOLT Report on Employment. Chairman Bernanke speaks 3:45 PM.  Earnings; HOV, LDK, MOD, TLB, ULTA, thus, housing, solar and retail.

·         Wednesday, 6/8/11: OPEC meeting, Mortgage Applications 7:00 AM (this gains in importance due to housing market slipping away again). Oil Inventories 10:30 AM. Hoening speaks 12:20 PM. 10-year auction 1:00 PM.  Beige Book 2 PM. Bradley turn window opens for 6/8 thru 6/22 indicating a potential trend change in the markets may occur. Earnings; CIEN, HOFT, PLL, thus watch technology, furniture, industrials, water.

·         Thursday, 6/9/11: ECB Rate Meeting—no change expected (watch the euro since any more dovish talk by Trichet will move the euro down, dollar up, commodities down, equities down). International Trade and Jobless Claims at 8:30 AM. Wholesale Trade 10:00 AM. Natty Gas Inventories 10:30 AM. Yellen speaks 11:30 AM. 30-year bond auction 1:00 PM. Fed Balance Sheet and Money Supply at 4:30 PM. Earnings; CHNR, NSM, SJM, UEC, MTN, thus, commodities, uranium, semi's, and the consumer.

·         Friday, 6/10/11: POMO schedule at 2 PM to close out the QE2 scheme this month. Treasury Budget 2:00 PM.

·         June 2011:  PBOC (China) Rate Hike. Probably 25 bips again, target date area for China raise is 6/6/11 thru 6/24/11.

·         June 2011:  ECB Rate Meeting 6/9/11, EU Bank Stress Test Results, Euro Finance Ministers 6/20/11, Euro Heads of State meeting 6/24/11—a 24-hour Greece strike also targets this date.

·         June 2011:  OPEC meeting.

·         June 2011:  QE2 Ends.  See the POMO information below. 6/10/11 final POMO schedule.

·         6/15/11:  Bradley Turn date. Market turn window 6/8/11 thru 6/22/11.

·         6/21/11 and 6/22/11: Fed FOMC Rate Decision and Policy.  No change expected, note the same date as the Bradley turn, perhaps a surprise is on tap.

·         6/22/11:  Bradley Turn date. Market turn window 6/15/11 thru 6/29/11.

·         7/15/11: Eclipse Sell-off Technique targets this time frame as a potential large market sell off area. The May time frame that was targeted sold off over 3%.  Therefore, this lessens the likelihood of a sell off in July ever so slightly since the May sell off absorbed some of the negativity for this May to July eclipse zone. But, remain on guard for a substantial July sell off nonetheless.

·         7/29/11 and 7/30/11:  Major Bradley Turn date. Major market turn window 7/22/11 thru 8/7/11.

·         8/9/11:  Fed FOMC Rate Decision and Policy. No change expected.

Keystone’s Short Term to ‘Intermediate Term’ Key Dates and Market Movers June and on:

·         POMO Pumps for QE2 thru 6/30/11:  Markets receive bullish pumps between 10:00 AM and 11:30 AM each trading day favoring market bulls.  Pumps continue thru 6/10/11 when the final QE2 schedule will be announced. N-D 75, D-J 75, J-F 80, F-M 80, M-A 80, A-M 80 B, M-J 80, thus, a total of 550 billion.  The POMO program was slated to be 600 billion total so on 6/10/11 the Fed will release the final schedule thru 6/30/11 which will be most likely the final 50 billion where the Fed uses the entire amount they originally targeted.  This reinforces Chairman Bernanke’s dovish view concerning the weakening economy and transitory inflation.  Thus, POMO pumps continue for 3 or 4 weeks longer, but then the punch bowl is empty. POMO pumps=bullish equity markets. POMO pumps end=bearish equity markets.

·         FOMC Meetings and Rate Decisions:  6/21-22/11; 8/9/11; 9/20/11; 11/1-2/11; 12/13/11. Fed should keep the Zero Interest Rate Policy (ZIRP) in place for the foreseeable future.

·         Congress to Raise Debt Ceiling: Geithner said 5/16/11 first, then 7/8/11, but now he really, really means it, with a drop dead date of August 2nd. Some in Congress say if Geithner has already moved the deadline forward, maybe it is not that big of a deal after all, and this is fostering complacency in Congress.  Congress never makes a decision until a deadline is in place.  Some republicans already saying the consequences will not be too bad if the deadline is missed—‘we’ll just shuffle some money around’.  Congress clowns now only have 8 weeks to raise the debt ceiling and they will not do anything until the deadline is near, tick, tock, tick…

·         Congress In or Out of Session:  Market bullish when not in session, market bearish when in session. Congress is in session, so market bearish.

·         Europe Debt Crisis Continues:  Portugal, Ireland, Italy, Greece and Spain, the PIIGS.  Italy’s bad paper may become exposed due to Libyan War.  Greece is a lost cause, look for more demonstrations against austerity with a 6/24/11 target date for Greek 24-hour strike. Greek unemployment data 6/6/11. Eurozone Finance Ministers meetings 6/20/11. Euro Heads of State meeting 6/24/11, thus, euro woes continue to heat up reaching a head in the days ahead.   Greece to repay a 5-year bond 8/20/11.  Weaker euro=stronger dollar=weaker commodities=weaker U.S. equities.

·         ECB Rate Hikes:  Trichet announces next rate decision 6/9/11.  No change occurred 5/5/11.  Trichet is less hawkish no longer talking about ‘strong vigilance’. Trichet raised rates 25 bips on 4/7/11. Trichet may have unwittingly called another top in the commodities markets just like he mistakenly did by raising rates at the wrong time in July 2008.  Trend has been euro up=dollar down=commodities up=equities up.  Euro propped up by Trichet’s hawkishness, thus, if euro now reverses, euro down=dollar up=commodities down=equities down.

·         Ongoing Wars: Libya, Iraq and Afghanistan. Libya not a big oil producer; Saudi’s can easily step up production to handle any Libyan oil loss.  Premiums remain in gold, silver and oil prices.  Any positive resolution to the Colonel Gaddafi situation, or ME tensions in general, will cause this premium to come back out.  Rational price of oil is low to mid 80’s but rationality never matters in trading. Oil will probably settle in the low to mid 90’s as the months tick along.  Wars and ME problems continue=bullish for commodities, gold, silver and oil, or, visa versa.

·         Continuing Geopolitical Events other than Ongoing Wars: Egypt, Syria, Saudi Arabia, Bahrain, Yemen, N. Korea:  Dollar bullish and equity bearish.  Gold, silver and oil bullish.  Bahrain is the big worry since, unlike Libya, further unrest will impact oil supply.  Emergency rule now lifted in Bahrain and it appears that things have settled down.  Yemen is important as well since it is a southern Saudi border. News wires impact commodities in real time.  Any bad news=higher gold, silver and oil prices, or, visa versa.

·         State and Muni Crisis; Union Busting:  Muni’s should experience pain first.  Muni’s rely on State funds.  Many State budgets turn over in June and July.  Colleges relied on State funds. Lingering unemployment lessens government tax inflows. U.S. will probably see an increase in the cash society, due to higher taxes, hurting government coffers more.  Multiple U.S. cities now experiencing budget fights and protests.  Governments trying to reduce burden of high union costs.  California financial decisions are occurring now.  Will these decisions spook the country? State and Muni problems are a H2 2011 and 2012 story.

·         College Debt Bubble: Students continue to take on mountains of debt and cannot get a job after education.  No effect near term but in the months forward the loan defaults will be a problem.

·         China Property Bubble and China Contagion:  When it pops, anytime now, it will be extremely negative on global markets causing contagion in Asia and elsewhere. China has built uninhabited cities to fuel their explosive growth during this century. Some evidence of Chinese now using hoarded copper supplies as collateral to continue the building.  Additionally, China is now targeting margin regulations to slow down the commodities and PM bubbles. This is going to end very badly. Keystone agrees with Jim Chanos’ view on China. China bubble pops=global markets down.

·         PBOC; China Rate Hikes:  First hike 25 bps on 10/19/10; second hike 25 bps Christmas 12/25/10; third hike 25 bps China New Years on 2/8/11; fourth hike 25 bps on 4/5/11.  China said in 2010 that it will project about five hikes into June 2011.  Hikes have occurred October, December, February, April so the pattern reinforces the June hike next.  Bank reserve requirements are now ratcheting up continuously to slow down inflation but these appear to have less of an effect now.  Rate hikes cause commodities, gold, silver, PM’s and copper to sell off.  The 4/5/11 rate hike had a muted effect since Chairman Bernanke’s hot easy QE2 money is more powerful. Typically, rising rates reflect a countries currency, economic and market strength, but, China growth is slowing now, not increasing, which creates an odd rate raising environment. Target for China rate hike is 6/6/11 thru 6/24/11.  China raising rates and reserve requirements=lower commodities=lower US equities.

·         China New Premier:  Chosen in 2012, will it be a smooth transition?

·         India, Brazil, Taiwan, South Korea and other Emerging Market Rate Hikes:  Same effects as China rate hikes; commodities will sell off.  China, India and Brazil hikes are most important to global markets. Some emerging countries now choosing to stay on hold reinforcing the belief that inflation is transitory in nature. Chairman Bernanke’s hot easy QE2 money pumped up emerging markets and commodities for the last nine months creating larger bubbles.

·         Japan Disaster; Yen Currency Intervention:  The global markets are treating the disaster as a Japan problem with limited global impact.  Supply and parts concerns are occurring now due to Japan factory outages; automobile and technology markets most affected.  Additionally, Japan is performing policy manipulation and coordinated currency intervention to target the 85-86 dollar/yen area.  This could not be maintained so far, or 83, or 81.  Expect further coordinated intervention now. Dollar/yen up=dollar up=euro down=commodities down=equities down.

·         Oil; OPEC; Strategic Oil Reserve (SOR); Hurricane Season:  SOR adding some supply each month due to renovations.  OPEC meeting 6/8/11, Ahmadinejad will object to any Saudi production increase. Hurricane season now so that may keep oil price buoyant. Higher oil supply=lower oil price. Hurricane=higher oil price=good for construction material companies. Rational oil price is 80-85 so a 20 dollar premium remains; oil likely to move sideways thru the low to mid 90’s as the year progresses, or lower.

·         Wiki Leaks:  Embarrassing government information and bank information on ongoing basis, rumored to affect BAC most of all.  Weak financials places a cap on broad market upside. Also, financials and technology go hand in hand, thus, weak financials weakens technology further limiting upside potential for the broad market indexes.