1. POMO Pumps for QE2: Markets receive bullish pumps between 10 AM and 11 AM each day favoring market bulls. No pumping on Thursday 4/21/11 and markets are closed Friday. Pumps continue thru 5/11/11 when the next schedule into June will be announced. N-D 75, D-J 75, J-F 80, F-M 80, M-A 80, A-M 80 B, projection M-J 80, J 50. Thus, POMO pumps should stay at this pace for the next 11 weeks. POMO pumps=bullish equity markets.
2. Japan Quake-Tsunami-Nuclear Disaster; Currency Intervention: The disaster continues without any end in sight but the global markets are largely ignoring the situation. Supply concerns will start to hit now, however, especially automobile parts and technology markets. Additionally, Japan is performing policy manipulation and currency intervention to keep the dollar/yen in the 85-86 target zone. At 83 now, which is also key support, expect further intervention now. Possible effect dollar/yen up=dollar index up=equities down=euro down.
3. Ongoing Wars: Libya, Iraq and Afghanistan. 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. The ME premium in gold is about 10%, oil and silver ME premiums are over 30% now. Any positive resolution to the Colonel Gaddafi situation, or ME tensions in general, will cause this premium to come back out quickly. Rational price of oil is low to mid 80’s. Silver and gold rising on speculation and need for ETF’s to buy and stockpile commodities. Wars and ME unrest continue=bullish for commodities, and visa versa.
4. 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. Yemen as well since it is a southern border. Bahrain news impacts commodities in real time. Any bad Bahrain news=higher gold, silver and oil prices, and, visa versa.
5. 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, now on our doorstep. Colleges relied on State funds. Lingering unemployment lessens government tax inflows. Multiple U.S. cities now experiencing pro and con union busting protests. 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 her 60 Minutes projections concerning Muni’s.
6. 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 on the redemption path now but Spain is next and a lot larger concern. Weaker euro=stronger dollar index=weaker U.S. equities.
7. ECB Rate Hikes: Trichet raised rates 25 bips on 4/7/11. ECB expects additional measured hikes to occur moving forward. Trichet raised rates July 2008—exactly at the wrong time—when the commodities bubble popped. Is Trichet calling a top again? Euro down=dollar index up=US equities down.
8. 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. This is going to end badly. China bubble pops=global markets down.
9. 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; fourth hike 4/5/11. China said in 2010 that it will project about five hikes into June 2011 so projection for next hike is June. 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. Rate hikes cause commodities, gold, silver, PM’s and copper to sell off although the 4/5/11 effect was muted. Chairman Bernanke’s hot easy QE2 money is more powerful. China raising rates and hawkish policy=lower commodities=lower US equities.
10. India, Brazil, Taiwan and other Emerging Market Rate Hikes: Same effects as China rate hikes; commodities will sell off. China, India and Brazil hikes are most important.
11. Congress: Market bullish when not in session, market bearish when in session. The debt ceiling is the next crisis to play out by mid May. Congress takes a spring break now between 4/18/11 and 4/29/11, market bullish.
12. Strategic Oil Reserve: The talk of using the reserve is moot since about 7 million bbls over next few months will be drained for SOR renovations anyway; say one million bbls per month oil supply will hit the market now into the Fall. Higher oil supply=lower oil price.
13. Wiki Leaks: Embarrassing bank information rumored to affect BAC most of all. This may be partially the blame, as well as lackluster earnings, for the financial sector languishing now. Weak financials places a cap on broad market upside.
14. 4/18/11: Earnings, C, TXN. A gauge on financials and technology.
15. 4/19/11: Housing Starts, always a key market mover.
16. 4/19/11: Earnings, GS, IBM, INTC, YHOO. Tech rules the roost today.
17. 4/20/11: Earnings, AAPL, T, TRV, UTX, FCX, QCOM. Tech and Dow 30 stocks, FCX provides insight into recent copper weakness.
18. 4/21/11: Earnings, GE, MS, MCD, BLK, DD. Financials and a gauge on chemicals with DD-the building blocks of a recovery.
19. 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.
20. 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?
21. 5/15/11: Eclipse Sell-off Technique targets this time frame as a potential large market selloff area.
22. 5/16/11 and on: Congress to Raise Debt Ceiling. This may be another down-to-the-wire fight like the budget crisis was. Interesting that this deadline coincides with the eclipse sell-off projection.
23. June 2011: PBOC (China) Rate Hike. Probably 25 bips again but perhaps 50 bips which would shock markets.
24. June 2011: EU Bank Stress Test Results.
25. June 2011: QE2 Ends. See the POMO information above.
26. 6/15/11: Bradley Turn date.
27. 6/22/11: Bradley Turn date.
28. 7/15/11: Eclipse Sell-off Technique targets this time frame as a potential large market selloff area.
29. 7/29/11 and 7/30/11: Major Bradley Turn date.
30. 2012: China chooses a new Premier, smooth transition?
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