Sunday, May 26, 2013
Keystone's Key Events and Market Movers for Trading the Week of 5/28/13
Key Dates and Times for the Week Ahead:
· Keystone’s Comments on the Upcoming Week: Happy Memorial Day and Thank You to all the Veterans. Markets are closed Monday and reopen Tuesday morning so the action in Asia and Europe will provide an early read on the week. Consumer Confidence will pivot markets at 10 AM Tuesday. GDP is important on Thursday morning and Chicago PMI and Sentiment on Friday Morning. Manufacturing data will indicate if the malaise continues in this key sector, or not. TIF and KORS earnings will indicate if the wealthy continue to spend. Global bellwether JOY will also move markets. 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 during June, July and August, 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 on a break which is typically a positive for markets. The European debt crisis is ongoing but the BOJ easy money has flooded into European stocks and bonds causing bond yields to drop and create calm. The ECB’s OMT bond-buying program is in place and not fully accessed as yet also creating a faux stability. 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 not having an effect 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 BOJ (Japan) is the single most important bullish influence on markets over the last three months; weaker yen = higher dollar/yen = 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 100,000 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 unable to handle the huge influx of people. North Korea theatrics keep popping up from time to time. Geopolitical risk is not currently priced into the markets. Q1 earnings season winds down but TIF and KORS are a key indicator for how the wealthy are spending and will impact the retail sector. Watch XRT and RTH. JOY, a global economic bellwether is the most important earnings release this week. The theme of companies coming in light on top line revenue continues but traders are focused on the EPS beats and ignoring sales. 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. Tech (COMPQ) and small caps are not showing the leadership they had a month ago. 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. With the slight elevation of Treasury yields last week (10-year yield over 2%), the interest rate sensitive sectors such as utilities, REIT’s and telecom are hit harder; three sectors that everyone ran into with the Fed and BOJ easy money. Volatility finally makes a move higher last week with the VIX briefly moving above 15, but leaks lower as the week finishes. Higher volatility will keep the selling pressure on equity markets. Lower volatility provides bullish rocket fuel for equities. VIX 13.13 is key for the week ahead; bulls win with VIX under 13.13 and bears win above VIX 13.13. Broad market topping and roll over action is anticipated moving forward for the days and weeks ahead. Last week was the first negative week after the huge upside parabolic rise for four weeks straight. The month of May ends on Friday so a positive month will once again be recorded unless the SPX drops under 1600. The CPC put/call and NYMO are at levels that indicate a near-term market bounce may occur. The CPC has not been at these levels since the May 2012 sell off. Keybot the Quant trading algorithm remains short. Keybot is tracking volatility (watch VIX 13.13) and copper (watch JJC 41.73) as the two most important influences on broad market direction. 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 moves along. Now through August is set up as an epic period for markets and economic history.
· Monday, 5/27/13: U.S. Markets are Closed in Observance of Memorial Day. Earnings: NATR, OTIV, SCLN.
· Tuesday, 5/28/13: U.S. Markets Reopen for trading. Case-Shiller House Price Index 9 AM. Richmond Fed Mfg Index and Consumer Confidence 10 AM-market pivot point. Dallas Fed Mfg Index 10:30 AM. 2-Year Note Auction 1 PM. Earnings: CSIQ, SDRL, TIF.
· Wednesday, 5/29/13: Mortgage Applications 7 AM. Fed’s Rosengren speaks 12 PM. 5-Year Note Auction 1 PM. Earnings: BWS, CHS, DSW, TFM, MAGS, KORS, TSL .
· Thursday, 5/30/13: Corporate Profits, Jobless Claims and GDP 8:30 AM. Pending Home Sales 10 AM. Natty Gas Inventories 10:30 AM. Oil Inventories 11 AM. 7-Year Note Auction 1 PM. Earnings: BIG, CHG, COST, EXPR, FRED, GLNG, GES, JOY, KKD, LGF, MOD, PLL, PANW, SAFM, YGE.
· Friday, 5/31/13: EOM. Personal Income and Spending 8:30 AM. Fed’s Pianalto speaks 8:45 AM. Chicago PMI 9:45 AM. Consumer Sentiment 9:55 AM-market pivot point. Farm Prices 3 PM. Earnings: ABIO, FRO.
· Monday, 6/3/13: PMI Mfg Indexes. Construction Spending and ISM Mfg Index 10 AM-market pivot point. New money tends to enter the markets and create buoyancy the first couple days of the month. Earnings:.
· Tuesday, 6/4/13: Motor Vehicle Sales. International Trade 8:30 AM. Earnings:.
· Wednesday, 6/5/13: Mortgage Applications 7 AM. ADP Jobs Report 8:15 AM. Productivity and Costs 8:30 AM. ISM Non-Mfg Index and Factory Orders 10 AM. Oil Inventories 10:30 AM. Beige Book 2 PM-market pivot point. Earnings:.
· Thursday, 6/6/13: ECB Rate Decision 7:30 AM EST and Draghi Press Conference 8:30 AM. Chain Store Sales. Challenger Job Report 7:30 AM. Jobless Claims 8:30 AM. Natty Gas Inventories 10:30 AM. Earnings:.
· Friday, 6/7/13: Monthly Jobs Report 8:30 AM-market pivot point. Consumer Credit 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 time reminiscent 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.