Sunday, May 19, 2013
Keystone's Key Events and Market Movers for Trading the Week of 5/20/13
Key Dates and Times for the Week Ahead:
· Keystone’s Comments on the Upcoming Week: The week starts with Chairman Bernanke speaking at 8 AM Monday morning no doubt pumping QE to boost stock prices. The economic data does not hit until the back half of the week. On Wednesday, Bernanke speaks again and the FOMC Minutes are released in the afternoon. The PMI Manufacturing numbers from around the world are important on Thursday as well as New Home Sales. Durable Goods are Friday. This week is the earnings lollapalooza for the retail sector and the results, especially HD and TGT, will affect the overall market mood. TOL will provide input into the housing recovery. The holiday weekend is upon us and markets tend to be bullish in front of a holiday. The Sequestration budget cuts create concern over a second half slowdown this year. The Debt Ceiling limit and CR (Continuing Resolution to fund the government) deadlines are pushed into September after Labor Day. Politicians must solve the U.S. fiscal mess this summer, reminiscent of 2011 which did not end so well. Traders remain complacent since the politicians will always kick the can down the road. Of course, if a stumble occurs, it would impact markets severely. Congress is in session which is typically a negative for markets. The European debt crisis is ongoing with troubles in Cyprus, Greece, Portugal, Slovenia, Spain and Italy. The BOJ easy money has flooded into European stocks and bonds causing bond yields to drop dramatically. The ECB’s OMT bond-buying program is in place and not fully accessed as yet, especially due to the faux calm created by lower yields. Merkel (Germany) does not want any nation to exit the euro before her re-election in September but will not care afterwards. The next ECB Rate Decision and Press Conference is 6/6/13. Draghi lowers rates one-quarter point to 0.5% on 5/2/13 to help the European manufacturing, export and automobile sectors, and compete with the currency debasement ongoing around the world. The euro should move lower which moves the dollar higher and should move commodities and U.S. equities lower, however, weak commodities are having no affect on markets due to the Fed and BOJ money-printing. The China hard versus soft landing saga continues. Copper and commodities have tumbled lower for two months but surprisingly have not created any equity market weakness. Dr. Copper used to be a valuable market indicator but the Fed and BOJ central banker policies are distorting markets and masking price discovery. The Fed and BOJ money printing is creating the bullish stock market obviously overriding the negative effects of lower commodities, for now. The BOJ (Japan) is the single most important bullish influence on markets over the last three months; weaker yen = higher dollar/yen (now over 103) = higher equities while stronger yen = weaker dollar/yen = weaker equities. The equity markets continue to ignore the geopolitical landscape. Syria is out of control with over 70,000 now dead from this bloody civil war. Israeli airstrikes, U.S. and U.K. evacuations in Libya, Egypt unrest and other trouble is destabilizing the Middle East and Northern Africa regions. Syria refugee’s flood into Jordan and other neighboring countries that are unable to handle the huge influx of people. North Korea theatrics keep popping up from time to time. Traders do not have any geopolitical risk priced into the markets right now due to the Fed and BOJ QE rally. Q1 earnings season continues. The theme of companies coming in light on top line revenue continues, even after the bar is lowered. A strong economy should show ever increasing revenue numbers, not flat to lower sales. Companies are booking profits by squeezing every last drop of blood from existing employees rather than growing sales. Earnings of interest this week include heavy-hitters HD, TGT and TOL. Retail earnings overwhelm the landscape this week and will set the tone for markets. TOL will provide a thumb’s up, or thumb’s down, for the housing recover. Shipper earnings are an important bellwether for the global economy. Tech (COMPQ) underperformed the market last week so the main rotation is into the XLI industrials sector which overperformed. Pay attention to the XLI to gauge the market mood. The Fed and BOJ easy money continues to create new asset bubbles in dividend stocks, healthcare, staples, utilities (now retreating like a parabolic commodity stock), telecoms, REIT’s, high-yield instruments, home builders and blue chips in general. The low volatility provides bullish rocket fuel for equities as evidenced by Friday’s upside orgy. VIX 13.18 is key for the week ahead; bulls win with VIX under 13.18 and bears win above VIX 13.18. Broad market topping and roll over action is anticipated moving forward for the days and weeks ahead despite the huge upside run over the last four weeks; the SPX is currently exploding higher at 30 points per week, about six points per day due to the central banker actions. The SPXA150R, BPSPX and put/call data indicate a significant market top but the Fed and BOJ money keeps pumping stock prices higher. The BPSPX is at levels where all other significant market tops have occurred. The low CPC put/call verifies the low volatility (VIX under 13.18) highlighting complacency and fearlessness in the markets. Traders have zero concern over markets selling off since the central bankers will pump markets higher forever. Keybot the Quant trading algorithm remains long. Keybot is tracking volatility (watch VIX 13.18) as the most important market metric affecting the broad indexes right now as described above. The month of May began at the very important SPX 1597-1598 support/resistance level so pay close attention to this level as the last nine trading days of the month begin. Markets are typically bullish the two days in front of a three-day holiday weekend (Thursday and Friday) and also tend to be bullish moving through the full moon (Friday) so the bulls continue to receive happy news. The next Bradley turn is a major turn on 6/22/13 (Bradley turns do not forecast direction only that a major trend change or melt-up, or melt-down, in markets may occur +/- 7 days around the turn date). Keystone’s Eclipse Indicator targets this period through June as having potential for a significant market selloff. The 4/10/13, and 6/10/13 dates, allowing +/- 2 weeks before and after these dates, are the key windows targeted for a major market pullback. Interestingly, the 4/10/13 date, forecasted months in advance by Keystone, identified the exact market top in April. A major market selloff can occur at anytime forward but the window between 5/27/13 and 6/24/13 is particularly important. Solar flare activity is increasing and may affect electronics, communications and markets as the year plays out. Now through August is set up as an epic period for markets and economic history.
· Monday, 5/20/13: Victoria Day (Canada). Chairman Bernanke speaks 8 AM. Chicago Fed Activity Index 8:30 AM. Earnings: CPB, CSUN, EXM, GES, HGG, KID, PVH, RUE, STP, TIVO, URBN.
· Tuesday, 5/21/13: Earnings: ADI, AZO, BBY, DCIX-shipping, DKS, HD, INTU, MDT, NTAP, SKS, TDW, TJX, VOD.
· Wednesday, 5/22/13: Mortgage Applications 7 AM. Existing Home Sales 10 AM. Chairman Bernanke speaks 10 AM. Oil Inventories 10:30 AM. FOMC Minutes 2 PM—market pivot point. Earnings: AEO, BAH, DSX-shipping, DRYS-shipping, EV, HPQ, LTD, NTZ, PSUN, TGT, TOL, WDAY, ZLC.
· Thursday, 5/23/13: China PMI. European PMI’s. Jobless Claims 8:30 AM. PMI Mfg Index 8:58 AM. FHFA House Price Index 9 AM. New Home Sales 10 AM—market pivot point. Natty Gas Inventories 10:30 AM. Kansas City Mfg Index 11 AM. 10-Year TIPS Auction 1 PM. Markets are typically bullish the two days leading into the three-day holiday weekend (reference Keystone’s Pre-Holiday Bull Indicator on the Other Market Signals page). Markets are typically bullish moving through the full moon (reference Keystone’s Full-Moon Indicator on the Other Market Signals page). Earnings: ARO, ALKS, BONT, BKE, CRM, DLTR, GAME, GME, GPS, HRL, MRVL, P, PLCE, RL, ROST, SHLD, SFL, TARO, WSM, ZUMZ.
· Friday, 5/24/13: Durable Goods Orders 8:30 AM. Three-day holiday weekend ahead. Bond markets close 2 PM EST. Full moon and eclipse. Earnings: ANF, FL, HIBB, PRLS.
· Monday, 5/27/13: U.S. Markets are Closed in Observance of Memorial Day.
· Tuesday, 5/28/13: U.S. Markets Reopen for trading. Consumer Confidence 10 AM. 2-Year Note Auction 1 PM. Earnings:
· Wednesday, 5/29/13: Mortgage Applications 7 AM. Oil Inventories 10:30 AM. 5-Year Note Auction 1 PM. Earnings:
· Thursday, 5/30/13: Jobless Claims and GDP 8:30 AM. Natty Gas Inventories 10:30 AM. 7-Year Note Auction 1 PM. Earnings:
· Friday, 5/31/13: EOM. Personal Income and Spending 8:30 AM. Chicago PMI 9:45 AM. Consumer Sentiment 9:55 AM. Farm Prices 3 PM. Earnings:
· In September: The Debt Ceiling Limit and CR Continuing Resolution to fund the U.S. government deadlines occur. Politicians must develop solutions over the summer timereminiscent of 2011 which did not end well.
· In September: Merkel (Germany) seeks re-election and will not want Greece or other nations to exit the euro before the election, but will not care afterwards. Perhaps Greece or other nations, and/or Germany will exit the euro in the future.
· In Q4 2013: European bank stress tests will occur.
---------------------------- 2014 ----------------------------------
· On Friday, 1/31/14: Chairman Bernanke’s term ends at the Fed, unless there is news during Q4 2013 that he will stay on. Will Yellen, even more dovish and likely wanting to see QE on steroids, take the reins? Equity bulls will be happy if Yellen receives the nod but bears will be happy if Yellen is not selected.
· 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.