Keystone's Key Events and Market Movers Week of 1/30/12

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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.

Summary for the New Trading Week Ahead:

Technology continues to lead the markets higher and keeps the market bears at bay.  Tech’s strongest quarter is Q4 seasonality-wise but as we are now nearly one month into 2012, January is a very bull-friendly month for tech as well. Tuesday is the EOM so the month-end prints for the monthly charts will be cast in concrete. Chairman Bernanke greased the quantitative easing skids last Wednesday afternoon and the markets had a large run-up but have already given the bulk of it back on Thursday and Friday.  The Fed should request their money back since they did not get much bang for their QE buck.

Thus, the bulk of this rally is due to the China anticipated easing.  Continue to look for an easing move by China in the coming days but the markets may have already priced in the boost that would be expected.  Markets love quantitative easing, money printing, stimulus, whatever you want to call it, and the lowering of the triple R’s boost copper prices, commodities, and equities.

The projection remains that should the broad markets sell off, the China announcement, when it occurs which is anytime over the next two weeks, will result in a temporary market bottom with markets then rallying back up to the current highs.  If the broad markets move sideways to sideways up thru the SPX 1314-1319 resistance cluster, as the new week begins and moves forward, and China announces the triple R ease as this market buoyancy continues, it may develop into a sell the news event and broad markets will leak lower.

The European bond markets calmed down although Portugal did rocket higher in yield signaling that it will need a second bailout very soon.  For the ongoing European crisis, continue watching the Italy, Spain and France 10-year yields to gauge the creeping contagion. Greece continues to promise a resolution with bondholders but with the E.U. Summit occurring tomorrow, Monday, hours away, the time is now to deliver the goods.  The German, U.K., and U.S. 10-year yields show money seeking safety in these countries.  Italy and Belgium bond auctions are important on Monday morning as well.

Continue to watch the following asset relationship, which occurred when Chairman Bernanke announced more easy money last week; euro higher=dollar lower=commodities higher=gold higher=U.S. equities higher=treasuries price lower and yields higher, or, the visa versa, euro down=dollar up=commodities down=gold down=U.S. equities down=treasuries price higher and yields lower.  Interestingly, however, the treasury market is showing steady interest even if the equities markets rally.  As long as the U.S. 10-year yield stays under 2%, disinflation remains a threat moving forward.

Monday’s trade starts with Personal Income data at 8:30 AM, but all eyes will be focused on Europe, the E.U. Summit, the Greece bondholder talks and Portugal’s yields blowing out.  A Bradley turn date occurred on Saturday so a window remains open for a market trend change.  A market top occurred after Thursday mornings open so watch to see if the trend change down continues.

Tuesday begins with the Case-Shiller Housing Index, very important since everyone including the cab driver is announcing a bottom in the housing market.  One of Keystone’s key monthly numbers is the Consumer Confidence number at 10 AM which will likely result in a market pivot point.  Earnings will provide a great cross section of economic strength including tech, retail, insurance, ag, pharma, biotech, manufacturing, industrial, engineering and construction, infrastructure, shipping, steel and oil, something for everybody.  UPS is key since it is one of Keystone’s secular signals and the 20-week MA is on the verge of moving above the 50-week MA to signal further bullishness. ITW is a key indicator of the global economy since they produce the pumps, fans, and parts for engineering projects everywhere. A gauge on the existence, or not, of a Dividend Stock Bubble will be highlighted as well with companies such as XOM and LLY reporting, so watch earnings closely this day. Tuesday’s 4 PM close provides the EOM prints. Check Keystone’s SPX 12-Month MA Cross after Tuesday’s close.  If the SPX is above 1283 at 4 PM Tuesday, that is a big feather in the market bulls cap.

On Wednesday morning the final China PMI data hits and will impact markets greatly.  Perhaps by then China will make an announcement concerning the triple R ease? The energy trade will be in play since the ISM number will be released as usual, on the first of each month.  The Facebook announcement concerning a future IPO will gain media attention but there are far more interesting things to watch. More key earnings occur which will effect the tech sector.  WHR will provide a gauge on this housing recovery that everyone, underline everyone, says is underway.

Jobless Claims and Natty Inventories are important on Thursday morning, especially since President Obama hinted that more efforts will be provided towards natty gas in the future.  Chairman Bernanke testifies before the House Budget Committee at 10 AM so traders will focus on each word. BZH earnings provide further insight into the housing recovery.  The earnings will be coming fast and furious with a vast cross section of industries reporting again.

On Friday morning, the circus comes to town with the Monthly Jobs Report. MOD and WY will again provide insight into the strength of the housing recovery.

Despite the continued market bullishness, there is plenty to worry about, especially Europe with Greece, Portugal and Hungary major concerns.  Another interesting news event may be S&P or other rating agency downgrades of Japan and how this may throw a wrench into the global economic and currency machine.

Keystone’s Eclipse indicator targeted the January period as having a high potential for a large market selloff, but this window is now closed.  If the turn down did occur it would have had to be the top that occurred late last Wednesday and early Thursday morning and we will find out if the market downside continues this week. Keystone’s algorithm is posted in the left margin on this site so any move to the short side for the markets will show up there. For now, Keybot the Quant motors along on the long side since 12/20/11, about six weeks.

Market bulls have made serious gains in the broad markets over the last month, overtaking the moving average lines as well as key levels indicating a secular move back into more steady bull markets.  The bulls are in good shape as long as they stay above SPX 1283 as of Tuesday’s close. The dollar dictates the markets, up dollar = down markets and down dollar = up markets. Chairman Bernanke crushed the dollar last week.  Pay extremely close attention to the utilities, the UTIL 453 level.  UTIL is now at 449.  If UTIL stays below 453, the broad markets will weaken. If UTIL moves above 453, the market bulls will begin a new leg skyward.

Key Dates and Times for the Week Ahead:

·         Monday, 1/30/12: Markets remain at the mercy of Europe news moving forward.  E.U. Summit occurs today and a Greece resolution with bondholders is needed immediately.  A deal has been promised each day for the last two weeks. Italy and Belgium bond auctions.  Portugal yields are blowing out so a second bailout will be needed there and look for this to gain attention. Hungary is another concern and although the bond auctions have went well the last few days the France 10-year yield remains above 3%.   Watch for a China easing of the triple R’s, anytime over the next couple weeks. A Bradley turn window is open thru 2/3/12 and watch to see if the trend change towards the down side continues from last Thursday.  Congress has returned to Washington from the holiday break so this typically casts a negative tone for markets. Personal Income and Outlays 8:30 AM.  Dallas Fed Mfg. Index 10:30 AM. Earnings: ALGN, BIDU, CEG, EEP, GCI, HAYN, MCK, NLY, PCL, SCCO.

·         Tuesday, 1/31/12: EOM. Case-Shiller House Price Index 9 AM.  Chicago PMI 9:45 AM. Consumer Confidence 10 AM. Farm Prices 3 PM-watch ag sector and CRB Index.  Earnings: AFL, AMZN, ADM, ARMH, BIIB, BXP, DHR, LLY, XOM, HRS, HP, ITW, ILMN, LLL, LXK, MTW, MAT, OSK, PCAR, STX, TLAB, UPS, X, VLO, WDR.

·         Wednesday, 2/1/12: Final China PMI. Motor Vehicle Sales data. Mortgage Purchase Applications 7 AM. Challenger Job Report 7:30 AM. ADP Employment Report 8:15 AM. Fed’s Plosser speaks at 8:30 AM. Treasury Refunding Announcement 9 AM.  Construction Spending and ISM Manufacturing Index 10 AM.  Watch the energy sector in response to ISM.  Oil Inventories 10:30 AM.  Facebook files for IPO? Earnings: AET, ALL, AMP, AOL, BMC, CMG, CVLT, CLB, COCO, CCK, EA, EPD, HAIN, HSY, JDSU, LVS, MAN, MRO, MPC, NOC, QCOM, TMO, TSCO, TUP, WHR.

·         Thursday, 2/2/12: Groundhog Day. Merkel arrives in Beijing. Chain Store Sales.  Jobless Claims and Productivity Costs 8:30 AM.  Fed Chairman Bernanke testifies before the House Budget Committee 10 AM. Natty Inventories 10:30 AM.  Fed Balance Sheet and Money Supply 4:30 PM. Fed’s Fisher speaks 7:15 PM. Earnings: APKT, AFFX, ALKS, AGN, BZH, BEBE, BX, BSX, CI, CME, CMW, CMI, CYTK, DO, DRIV, DOW, EVR, FISV, FLXS, GNW, GILD, GR, HPOL, IP, IRF, K, KEM, KEX, MA, MRK, MCHP, NOV, NYT, NVLS, PCX, PTEN, PENN, PHM, RCL, RGLD, R, SLE, SE, HOT, SUN, TTWO, TE, TSO, THQI, TDW, TRMB, VRTX, VIAB, XEL, Z.

·         Friday, 2/3/12: Monster Employment Index. Monthly Jobs Report 8:30 AM. Factory Orders and ISM Non-Mfg Index 10 AM.   Earnings: AXL, BEAM, EL, MOD, SPG, SEP, CLX, TSN, WY.

Key Dates and Times for the Months Ahead:

·         Thursday, 2/9/12:  ECB Rate Decision and Press Conference.

·         Monday, 2/20/12:  Euro Zone Finance Ministers meet in Brussels.

·         Tuesday, 2/21/12:  Ecofin meeting of European Union finance ministers in Brussels.

·         Thursday, 3/1/12: EU Summit for heads of state in Brussels begins.

·         Friday, 3/2/12: Monthly Jobs Report

·         Thursday, 3/8/12: ECB Rate Decision and Press Conference.

·         Monday, 3/12/12: Eurogroup meeting of euro zone finance ministers in Brussels begins.

·         Tuesday, 3/13/12: Ecofin meeting of European Union finance ministers in Brussels.

·         Tuesday, 3/20/12: Greece deadline for financing.

·         Friday, 3/30/12:  Informal meeting of EU finance ministers in Copenhagen begins.

·         Thursday, 6/28/12: EU Summit for heads of state in Brussels begins.