Keystone's Key Events and Market Movers Week of 2/6/12

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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. Each time the Nasdaq starts to lag the broad market, the bulls goose tech again adding more bull fuel.  The financials are a large user of technology so their strength follows along as well.  The happy jobs number on Friday, which qualifies as an upside surprise, expectedly resulted in the industrials, discretionary and financials sectors sky rocketing. Tech is a major lynchpin of this November-February rally and the rally will exhaust when the leading momo of the tech sector exhausts.  The cracks were forming last week so starting Monday, simply watch the Nasdaq versus S&P 500 percentage moves in real-time. If the Nasdaq 100 and Nasdaq Composite start to lag the broad market, the SPX, that will show tech running out of gas. Typically, traders enjoying the expected Fall buoyancy in the tech sector take profits cashing out of positions starting the second week in February. 

Placing the technical aspects aside for a minute, let’s look at the global macro mess.  The world events impacting markets are so numerous that you need a scorecard to keep track.  A biggie is the European debt mess.  Greece has promised a resolution with bondholders for a month now with no end in sight to the drama.  The deadlines have become a joke.  In markets, confidence is key, and the last thing Europe needs is for the world to look upon them as a joke.  The Portugal yields had blown out indicating new holes in the dike but that was remedied by ECB bond buying. Last week, Keystone highlighted the tension in the Hungary yields and yesterday Hungary is now pursuing new funding. The markets benefited during January simply because Europe was more out of sight and out of mind, not because anything is improving on the Continent. Continue watching Greece, Portugal, Hungary, Spain, Italy and France moving forward, any of them capable of creating instant angst.

The LTRO created temporary calm.  A new LTRO is needed moving forward; the numbers bandied about are from 500 billion to one trillion. Markets will view 500 billion as a disappointment since the markets want that continual fix of crack, not a taste of stale beer.

The January equities rally ran higher not only on tech, but on commodities and copper.  The simple hint that China was planning to lower the triple R requirements, an easing step, sent copper thru the roof over the last month.  China is scared silly that they will now create new asset bubbles, especially in the commodities markets, which will most definitely come to a crashing end as they all do.  China has seen the effects of Chairman Bernanke’s QE2 measures and the commodities bubble that was created, and popped, in 2011.  Traders are not considering that the equities rally occurred on the back of the anticipated China easing and at least one triple R easing, say 50 basis points, is already well priced into markets if not more. Watch China CPI this week which will greatly affect markets.

The macro events also include the U.S. Presidential election circus and China will be selecting a new Premier as well this year.  France elections are on tap.  The Israel and Iranian tensions grow.  Syria continues to kill its citizens daily. Oil remains elevated in price since a daisy chain of events is easy to foresee with the mix of Israel, Iran, Syria and the Straits of Hormuz tensions growing. The world wants the Syria killing to stop. Israel wants Iran to stop pursuing nukes. The U.S. will not tolerate any shenanigans in the Strait of Hormuz. Lots of political plates are spinning in the air. Congress is back in Washington nowadays so expect that to weaken markets since seasonality-wise, markets are bullish when politicians are out of session, bearish when in session. 

Drilling down for the new week ahead from a trader’s perspective, the week begins with Greece and Hungary a likely focus.  Expect the Europe situation to heat up again in general. Another key element to kick the new week off is the RBA announcing Australia’s rate policy.  This will immediately impact the commodities, miners and currency markets and set a major tone for Monday. Earnings continue this week with pharma, healthcare, energy, ag and tech sector’s figuring prominently.  On Monday, trader’s hope that HUM and YUM are not bum’s.  YUM is extremely important to round out the macro global vibe for Monday trading.  YUM results serve as a proxy for China since the growth of stores and business in China is a direct reflection on how China’s economy is doing.

On Tuesday, Japan’s Current Account Balance will impact markets.  Earnings will dominate with heavy-hitters such as DIS and KO. Perhaps we find out how many wings were consumed during the Superbowl with BWLD earnings. Chairman Bernanke speaks after the markets open so this may create market tension.

On Wednesday, the China CPI will immediately move currency, commodity and equities markets.  Perhaps China will attempt to present a Goldilocks number like last week’s PMI? The BOE rate decision occurs and more quantitative easing is expected from the BOE so look for words to that effect.   Oil Inventories are important and the 10-Year Note Auction will take on an air of excitement at 1 PM.  Expect market pivot points at 10:30 AM and 1 PM. The Kabuki Dance of 10-year yield rates around the world are a major focus moving forward.  Watch the commodities and ag trade when ANDE reports since the CRB Commodities Index will greatly impact broad market direction this week.  CSCO will impact the tech sector and RL, S and V are also important.

On Thursday, the ECB rate decision is huge.  As the euro goes, so goes the markets.  Remember the asset relationship; 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.  The ECB knows that Europe is in recession and rates will have to be lowered. Thursday is an important data day with Jobless Claims, Wholesale Trade, Natty Inventories and the 30-Year Bond Auction. Therefore, the 10 AM, 10:30 AM and 1 PM times are all potential market pivot points. Key earnings are BG, DNKN, KKR, the electronic Rolodex LNKD, if anyone remembers what a Rolodex is, LUFK, NBL, NXPI, PEP and SIRI.

The week ends Friday with International Trade data before the open and Consumer Sentiment just before 10 AM, which is a market pivot point. ACI and the NYX earnings are key.  ACI will focus a spotlight on the coal, natty and energy sectors.  Coal will be slapped hard if President Obama wins reelection so keep that in mind for the weeks ahead.

A full moon occurs Monday night into Tuesday always creating odd metaphysical vibes for traders.  About two-thirds of the time markets are bullish moving into the full moon while bearish moving into the new moon. Definitely not something to rely on for trading but something to consider nonetheless. Thus, markets are ripe for a pull back to begin any day, even Monday, but the bears may not be able to start pushing until Tuesday.

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. In addition, the China CPI number is uber important on Wednesday, was this mentioned enough?

Market bulls have made serious gains in the broad markets over the last month, overtaking the moving average lines as well as other key levels indicating a return to secular bull markets.  The bulls are in good shape as long as they stay above SPX 1284 and NYA 7650. The dollar dictates the markets, up dollar=down markets and down dollar=up markets. Chairman Bernanke crushed the dollar with extending the low rate Fed policy into late 2014.  This created the market push higher over the last week.

 Pay extremely close attention to the utilities, the UTIL 453.69 level.  If UTIL stays below 453.69, the broad markets will weaken. If UTIL moves above 453.69, the market bulls will begin a new leg skyward. If UTIL remains under, and the CRB drops under 309.50, the bears will finally make gains to the downside.  The RBA decision Monday, China CPI on Wednesday and ag earnings this week will impact the commodities markets, and thus the CRB, which will dictate broad market direction moving forward.

Key Dates and Times for the Week Ahead:

·         Monday, 2/6/12: Markets remain at the mercy of Europe news moving forward.  Listen for talk on the new LTRO program. Greece resolution with bondholders is needed immediately.  A deal has been promised each day for the last two weeks.  Hungary is a major concern but the ECB will probably step in.  Watch for any China news concerning easing of the triple R’s, any quantitative easing measures, or news that effects growth projections such as the China CPI on Wednesday. Also any China news in relation to helping Europe. Congress is in session in Washington so this typically casts a negative tone for markets. Australia’s RBA Rate Decision-watch currencies and commodities. Fed’s Fisher speaks 12:15 PM.  Treasury STRIPS 3 PM. Earnings: AMLN, APC, COGO, CSTR, ENER, HAS, HCA, HUM, ILMN, IMMU, IEX, LDR, LEG, LNCR, LMNX, SOHU, VECO, WPP, YUM-great proxy for China.

·         Tuesday, 2/7/12: Full moon.  Japan Current Account Balance. Fed Chairman Bernanke speaks 10 AM. 3-Year Note Auction. Consumer Credit 3 PM.  Earnings: BMI, BWLD, CERN, CDXS, DIS, KO, EMR, HAR, HIG, LGND, PNRA, QUIK, RICK, SMG, SGI, SNCR, WU.

·         Wednesday, 2/8/12: China CPI-watch currencies and commodities. BOE Rate Decision and Press Conference. Mortgage Purchase Applications 7 AM.  Oil Inventories 10:30 AM.  Fed’s Williams speaks 10:40 AM. 10-Year Note Auction 1 PM.  Earnings: ANDE, CSCO, CTSH, CVH, CVS, FMC, IR, ICE, IRBT, LVLT, MTRX, MCO, NANO, NBIX, NWSA, PRU, RL, S, THOR, TWX, TQNT, VLNC, V, WFM.

·         Thursday, 2/9/12: ECB Rate Decision and Press Conference. Jobless Claims 8:30 AM. Wholesale Trade 10 AM. Natty Inventories 10:30 AM. 30-Year Bond Auction 1 PM.  Fed Balance Sheet and Money Supply 4:30 PM.  Earnings: ALXN, ASEI, AMSC, AMKR, BG, CPST, CBOE, CCE, CPO, DNKN, ELON, EXPE, EXLP, FBN, GDI, GPRE, HERO, HOKU, IPSU, KKR, LNKD, LUFK, MPWR, NBL, NXPI, OVRL, PEP, PBI, SEE, SIRI, TDC.

·         Friday, 2/10/12: International Trade 8:30 AM.  Consumer Sentiment 10:30 AM.  Fed Chairman Bernanke speaks 12:30 PM. Fed’s Pianalto speaks 12:50 PM.  Treasury Budget 2 PM. Earnings: ACI, APO, BPL, FLIR, NYX.

Key Dates and Times for the Months Ahead:

·         Thursday, 2/16/12: Bradley turn date, so watch for a market trend change between 2/9/12 and 2/23/12, especially between 2/13/12 and 2/20/12.

·         Monday, 2/20/12:  U.S. Markets Closed. 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.