Keystone's Key Events and Market Movers for Week of 3-28-11

1.      POMO Pumps:  QE2 market pumps from 10:15 AM to 11 AM each day favoring market bulls. No POMO pump on Friday, 4/1/11.  NY Fed committed to 390 B thru 4/11/11.  210 B remaining from 600 B total for 4/12/11 thru 6/30/11. N-D 75, D-J 75, J-F 80, F-M 80, M-A 80, projection A-M 80, M-J 80, J 50.  Thus, POMO pumps should stay at this pace for the next three months ending 6/30/11 as planned.

2.      Preannouncement Season:  Time for CEO’s to visit the confessional during these final four days of Q1, companies will announce any bad news ahead of the earnings releases starting in April.  Multiple companies warning=negative bias in markets.  Not too many warnings=no effect on markets.

3.      Japan Quake-Tsunami-Nuclear Disaster; Currency Intervention:  Markets remain at the mercy of the news feed until final resolution is achieved with the nuclear reactors.  Additionally, Japan is performing policy manipulation and currency intervention to handle the markets and will probably intervene to stop the dollar/yen from falling under 80 with a goal to drive the yen weaker to dollar/yen 85-86.  Possible effect dollar/yen up=dollar index up=equities down=euro down.

4.      Ongoing Wars: Libya, Iraq and Afghanistan keep the war machine gears churning. Libya not a big deal concerning oil, Saudi’s can easily step up production.  A premium is now built into gold, silver and oil markets, thus, any positive resolution to the Colonel Gaddafi situation will cause this premium to come back out.  Libya War is one week old.

5.      Continuing Geopolitical Events other than Ongoing Wars such as Egypt, Syria, Saudi Arabia, Bahrain, N. Korea:  Dollar bullish and equity bearish.  Gold, silver and oil bullish.  Bahrain is the big worry; this will seriously affect oil supply.  A premium is now built into gold, silver and oil markets, thus, any positive resolution, especially to Bahrain will cause this premium to come back out.  Conversely, any bad news across the wires concerning Bahrain results in higher gold, silver and oil prices.

6.      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, only two months away. Colleges relied on State funds. Multiple U.S. cities now experiencing protests concerning union busting.  There simply is no money in Federal, State or Local coffers to handle years of promises.  Meredith Whitney continues to receive a lot of heat from the industry talking their book.

7.      Europe Crisis Continues:  Portugal, Ireland, Italy, Greece and Spain, the PIIGS.  Italy’s close ties with Libya are strained which may expose Italy’s bad paper. Portugal needs a bailout so a political saving face solution is being attempted.  Spain heating up now as well.  Weaker euro=stronger dollar index=weaker U.S. equities.

8.      ECB Rate Hike:  ECB bluster about a rate hike 4/7/11; 9 days away.  Trichet raised rates July 2008—exactly at the wrong time—when the commodities bubble popped. Is Trichet calling a top again?  The euro has maintained buoyancy in the near term as a direct result of this rate hike bluster.  If you promise a pony, you better deliver a pony.  If ECB balks and leaves rates untouched, euro down=dollar index up=US equities down.  If ECB does raise, no effect on markets.

9.      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.

10.  PBOC, China Rate Hikes:  First hike 10/19/10, 25 bips; second hike Christmas 12/25/10, 25 bips; third hike at end of China New Years on 2/8/11.  Expect the hikes to continue, a minimum of two more are targeted by June, so two hikes within the next 12 weeks.  China continues to raise reserve requirements as well and four more 0.5 hikes are expected by the end of 2011.   If the next rate hike is 50 rather than 25 bips, the markets will be surprised.  There were 67 days between the first and second hike, 45 days between the second and third hike, which puts the next projection to be NOW.  Hikes have occurred October, December, and February so that pattern would point to early April for the hike.  First three hikes occurred between the 8^th and the 25^th days of the months, we are now in that window at 3/27/11.  An educated guess points at a China rate hike this weekend or within the coming days.  The rate hike will cause commodities, gold, silver, PM’s and copper to sell off.  Lower commodities=lower US equities.

11.  India, Brazil and other Emerging Market Rate Hikes:  Same effects as China rate hikes; commodities will sell off, although the China rate hikes carry the most clout.

12.  Congress:  Market bullish when not in session, market bearish when in session.

13.  Strategic Oil Reserve:  The talk of using the reserve is moot since about 7 million bbls over next few months will be drained for renovations anyway; say one million bbls per month oil supply will hit the market now into Fall.

14.  Wiki Leaks:  Embarrassing bank information rumored to effect BAC most of all.  This would be a drag on the financial sector which in turn would limit any broad market upside.

15.  3/29/11:  Consumer Confidence at 10 AM EST, always a market mover.

16.  3/31/11:  EOM, EOQ1.

17.  4/1/11:  Jobs Report Friday at 8:30 AM EST, always a market mover.

18.  4/7/11: Potential ECB rate hike, or bluster? If a hike occurs, no effect on equities.  If a hike does not occur, euro down=dollar index up=US equities down.

19.  4/8/11:  Budget Crisis Deadline extended from 3/4/11, and then 3/11/11.  Government shutdown? Any bad news here will derail US equities.

20.  4/26/11 and 4/27/11: FOMC two-day meeting, QE3 announcement? 4/27/11 is the first press conference style meeting that Chairman Bernanke will conduct.  FOMC meeting days are typically flat to up for equities.

21.  5/1/11 and on:  California financial decisions.  Will these decisions spook the country?  Perhaps this time period sets the wheels in motion for the Muni/State crises a la Meredith Whitney?

22.  5/15/11: Eclipse Sell-off Technique targets this time frame as a potential large market selloff area.

23.  June 2011:  EU Bank Stress Test Results.

24.  June 2011:  QE2 Ends.  See the POMO information above.

25.  6/15/11:  Bradley Turn date.

26.  6/22/11:  Bradley Turn date.

27.  7/15/11: Eclipse Sell-off Technique targets this time frame as a potential large market selloff area.

28.  7/29/11 and 7/30/11:  Major Bradley Turn date.

29.  2012:  China chooses a new Premier, smooth transition?