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.
Key Dates and Times for the Week Ahead:
· Keystone’s Comments on the Upcoming Week: Monday begins the first full week of trading for 2013. AA kicks off earnings season this week. The fiscal cliff resolution kicks the can down the road again and very surprisingly results in a market melt-up since the bill is a national embarrassment that does not address the debt ceiling and does nothing to increase business confidence. For most folks, taxes are going up and many will notice it in their checks right away. The next deadlines are the debt ceiling in February, then the Sequester, then the Continuing Resolution. The ongoing political circus will likely negatively impact markets moving forward. The European debt crisis news directly dictates global market direction and things remain calm in recent months. Euro up = up markets. Euro down = down markets. Spain is delaying their bailout request so the ECB’s bond-buying program cannot be unleashed. Spain is reluctant to give up sovereignty and accept conditionality. Italy wants Spain to request a bailout since the ECB bond-buying will immediately improve Italy’s debt situation. Look for a strong market bounce and rally if Spain requests a bailout. A flight of deposits out of Greece, Spain and Italy is ongoing which may lead to bank runs. European riots and violence continue. The slow-motion development of a European banking union continues. Merkel likely wants Greece to stay in the euro until her election in September. The next ECB Rate Decision and Press Conference is 1/10/13. A cut is expected in early 2013, perhaps January, but maybe more likely at February’s meeting on 2/7/13, or March. If a cut occurs, the euro will drop and so will equities markets. If no cut occurs, the euro will move flat with a slight upward bias, and so will the equities markets. Europe must cut rates to weaken the euro and help the Eurozone grow out of the debt mess. The China hard versus soft landing saga continues. Watch for further China easing measures such as lowering rates or triple R’s, which will bounce copper, commodities and equity markets, but, do not hold your breath. China appears hesitant to act since they correctly worry about the commodities inflation and asset bubbles that will be created (Chairman Bernanke incorrectly defends QE saying it does not create asset bubbles). China continues to provide lip service about easing measures and the markets bite each time raising copper, commodities, and equities, all on promises. New leaders President Xi Jinping and Premier Li Keqiang will supply economic targets in March. China professes a 7.5% growth rate but no one asks how this is possible when their number one customer, Europe, is in recession, Greece and Spain a depression, the U.S. is flat and uninhabited cities litter the China countryside, waiting for the urban shift to a domestic-led economy. Perhaps the simple reason is the fudged 7.5% number. A weak global economy is driving the oil price lower but Middle East turmoil wants to take oil prices higher. Syria’s Asaad just pledged to fight on. Use the WTIC oil 90 and Brent oil 110 as pivot points. The Middle East violence is not a major concern in the context of oil price if Brent stays under 110. The SPX typically moves in the same direction as oil so higher oil means higher markets and lower oil means a move more towards disinflation and deflation, and slower global growth, and lower markets. The earnings season begins with AA on Tuesday. Tech companies have lowered estimates. Traders may be a little overly optimistic on financial earnings. Tech (COMPQ) and small caps (RUT) lead the markets and verify the direction of the broad indexes and were very bull friendly to start the year. Tech’s leadership did fade on Friday, however. Watch AAPL closely moving forward as it starts to favor a sideways channel thru 500-550. As AAPL goes, so goes the markets. Volatility plummeted last week to print under 15. The CPC put/call is 0.82. The VIX and CPC verify the ongoing complacency in the markets. Traders never doubted the outcome for the fiscal cliff and continue to believe that markets will travel higher without worry. A new moon occurs on Friday so markets may experience a preference for weakness on Thursday and Friday. A Bradley turn occurs 1/20/13 so a window opens for a potential trend change in the markets between 1/14/13 and 1/25/13. Keystone’s Eclipse Indicator identified this period ending now as having a high potential for a large market selloff but the window is now closing up and ending. The previous period identified by the eclipse indicator was October where a large selloff occurred. The next window will be in the spring time.
· Monday, 1/7/12: First full week of trading for 2013. There are no data releases on tap today. Lots of Fed talk scheduled this week. Consumer Electronics Show-watch tech stocks. JPM Healthcare Conference-watch healthcare and biotech stocks such as CELG, BIIB, etc…Earnings: EXM-shipping, NHC, PSX, PER, ZEP.
· Tuesday, 1/8/13: NFIB Small Business Optimism Index 7:30 AM. 3-Year Note Auction 1 PM. Fed’s Lacker speaks 1:30 PM. Consumer Credit 3 PM-a gauge on credit card spending. AA kicks off earnings season. Earnings: AA, APOL, MON, RTK, SCHN, WDFC.
· Wednesday, 1/9/13: Mortgage Applications 7 AM. WAG Analyst Day. Oil Inventories 11 AM. 10-Year Note Auction 1 PM. Earnings: GBX, RT, STZ, TXI, VOXX.
· Thursday, 1/10/13: ECB Rate Decision 7:45 AM and Press Conference 8:30 AM. Jobless Claims 8:30 AM. Wholesale Trade 10 AM. Natty Gas Inventories 10:30 AM. HLF Analyst Day—fuels the Ackman drama, CVX Interim Update. Fed’s George speaks 12:45 PM. 30-Year Bond Auction 1 PM. Fed’s Bullard speaks 2 PM. Fed’s Kocherlakota speaks 8 PM. Markets typically lean towards the bear side moving into the new moon. Earnings: SVU, XRTX.
· Friday, 1/11/13: International Trade and Import and Export Prices 8:30 AM. Fed’s Plosser speaks 9:30 AM. Crop Report-watch corn and soybeans. Treasury Budget 2 PM. New moon. Earnings: WFC-a gauge for banks and mortgages.
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· Tuesday, 1/15/13: Empire State Mfg Survey, PPI and Retail Sales 8:30 AM. Business Inventories 10 AM.
· Wednesday, 1/16/13: CPI 8:30 AM. TIC Data 9 AM. Industrial Production 9:15 AM. Beige Book 2 PM.
· Thursday, 1/17/13: Jobless Claims and Housing Starts 8:30 AM. Philly Fed 10 AM. Markets are typically buoyant moving into a three-day holiday weekend.
· Friday, 1/18/13: Consumer Sentiment 9:55 AM.
· Sunday, 1/20/13: Bradley turn. Bradley window is open for a market turn to occur between 1/14/13 and 1/25/13.
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· Monday, 1/21/13: U.S. Markets are Closed in Observance of Dr. Martin Luther King Day. Presidential Inauguration. The president will have the debt ceiling, sequester and continuing resolution hanging over his head as he assumes the oath of office.
· Tuesday, 1/22/13: U.S. Markets are Open for Trading.
· Friday, 1/25/13: New Home Sales 10 AM.
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· Monday, 1/28/12: Durable Goods 8:30 AM.
· Tuesday, 1/29/13: FOMC Meeting begins. Consumer Confidence 10 AM.
· Wednesday, 1/30/13: GDP 8:30 AM. FOMC Rate Decision 2:15 PM.
· Thursday, 1/31/13: EOM.
· Friday, 2/1/13: Monthly Jobs Report 8:30 AM. PMI Index 8:58 AM. Consumer Sentiment 9:55 AM. ISM Mfg Index 10 AM.
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· In February: Debt Ceiling limit is hit.
· In February: Italy elections.
· In February or March: New China President Xi Jinping and Premier Li Keqiang take over complete control and the ten-year transition of power is finished. China now sets inflation and budget targets moving forward.
· Friday, 3/1/13: Sequester hits with automatic spending cuts for government.
· Wednesday, 3/27/13: Continuing Resolution is required to fund the government.
· In March and April: The BOJ head’s will be replaced and strong QE will likely occur. Perhaps a low in the Nikkei in January or February may provide a point of entry ahead of the money-pumping?
· In September: Merkel (Germany) seeks re-election and will not want Greece to exit the euro before the election, but will not care afterwards. Perhaps Greece and Germany will both exit the euro in the future.
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· In March 2014: ESM is officially ‘fully operational’. The banking union schedule has been delayed from January 2013 to January 2014 and now to March 2014.
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