Keystone's Key Events and Market Movers Week of 2/21/12

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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:

Traders went into the holiday weekend wondering if the Greece resolution would occur by today (Monday), or not. They continue to wonder. At the same time, the big story turns out to be ‘earl’, as the rough necks say in Texas, oil.  The continual one-upmanship displayed in the Middle East, by Syria, Iran, Israel, China, the U.S., all the usual suspects, is leading to higher tension and oil prices are spiking upwards.

Almost half the States in the U.S. are now over $3.50 per gallon for unleaded gasoline at the pump.  It is interesting to see the retail sector make new highs when this news should send store keepers running for cover. When gasoline hit $4 years ago, that was a demand destruction level that sent the economy flailing. The cars were parked in the driveway not at the malls. The economy continues to languish over three years later.  Therefore, perhaps the threshold for demand destruction is closer than four bucks.  With prices between 3.50 and 4.00 now, it looks like we are already there.

The Greece drama will be important overnight tonight and of more importance is what the ECB plans for the second LTRO program which should be decided by the end of the month.  This ‘European TARP’ program is supplying the go-juice for markets. European 10-year bond yields have calmed due to the LTRO but keep watching for signs of trouble, Portugal and Hungary were of concern as last week ended.

China also supplied a surprise on Saturday with the triple R easing, only a surprise in the context that it was expected for the last four to six weeks and the behavior with copper this week will show how much of that easing is, or is not, already priced into markets.

Earnings continue at a healthy pace this week with retail sector, shipping, gold miners, housing and engineering/manufacturing a major focus. Keystone is shorting retail currently and receiving a beating in the back room.  Retail heavy-hitters are on tap such as WMT, TGT, DLTR, and JCP which will provide a gauge of consumer spending especially the low-end spending. The Baltic Dry Index (BDI) continues to languish so shipping earnings will focus further light on this sector which is a proxy for global economic health.  Gold miners such as Yamana and Newmont report earnings so watch the GDX and GDXJ ETF’s this week to note behavior. The housing sector is in focus with economic data, TOL earnings, and also earnings from HD and MHK that will provide information. Manufacturing data will hit this week from the Fed’s, so this, along with engineering earnings from CBI, FWLT, FLR and so forth will provide a lot of information as to exactly how well, or not, this sector, which is critical for strong economic development moving forward, is doing. Consumer Sentiment is key on Friday.

Technology, mainly due to AAPL, has led the broad markets all year long—until Friday where the Nasdaq was weak and red as the broad markets printed new highs. 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 and thus affect the broad markets negatively. Traders enjoying the technology rally will likely take profits.  February is typically a month where tech traders take profits since the strong Q4 seasonality has now passed.

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 euro = down commodities = down markets and down dollar = up euro = up commodities = up markets. Chairman Bernanke crushed the dollar with extending the low rate Fed policy into late 2014.  The euro moves opposite the dollar and in the same direction as equities.

For the start of trading this week tomorrow morning, 2/21/12, pay extremely close attention to the utilities, the UTIL 452.91 level and copper, using JJC as a proxy, the JJC 47.60 level.  If UTIL stays below 452.91, the broad markets will weaken. If JJC falls under 47.60, the broad indexes will substantially weaken.  If UTIL moves above 452.91, the market bulls will push the broad markets higher.  Watch volatility, VIX, behavior this week.  Watch to see if tech leads up, or down.  JJC will directly indicate the market response to the China triple R ease.

For the SPX, starting at 1361, the market bulls need to push thru the 2011 closing high number of 1363.61, if so, that will light up the bulls and a move to test the 2011 intraday HOD at 1070-1071 would be inevitable. The market bears need to push the SPX under 1357, if so, the broad market selling will accelerate. A move thru 1358-1362 is sideways action.

Key Dates and Times for the Week and Month Ahead:

·         Monday, 2/20/12: U.S. Markets are Closed for the Washington’s Birthday and President’s Day holiday. Traders are awaiting resolution to the Greece drama.  Listen for news concerning the second LTRO program over the coming days. Watch the European 10-year bond yields, especially Portugal and Hungary to start the week.  Congress is off for a one week recess for the President’s Day holiday, but will reconvene soon enough which is a market negative. China finally announces the triple R ease that traders have been waiting for the last six weeks add the copper action will show how much is, or is not, priced into the equities markets.  Markets are in a Bradley turn window now so watch for a potential market trend change to occur, especially between now and Monday, 2/27/12; at the very least, expect the unexpected; actual exact turn date is Wednesday.  Earnings: COG, CHH, CTRP, AEGN, JASO, PZZA, SHLD, WTS.

·         Tuesday, 2/21/12: New Moon. Markets tend to be weak moving in and thru the new moon. Chicago Fed National Activity Index 8:30 AM.  2-Year Note Auction 1 PM.  Earnings: APL, BALT, BKS, BYD, CQB, CCO, DELL, WIRE, EXPD, FST, GNK, GERN, GLRE, HL, HLF, HD, INTU, KFT, LZB, M, MHS, MDT, MYL, NBR, NFX, ORB, RSH, RRC, SKS, SJW, SONS, FIRE, VSEC, WMT, WLT, WINN.

·         Wednesday, 2/22/12: Bradley turn date. Mortgage Purchase Applications 7 AM.  Existing Home Sales 10 AM. 5-Year Note Auction.  Earnings: SAM, AUY, BRKR, CBOU, CHS, CLW, DLTR, DRYS, ESRX, FLS, FLR, GRMN, LTD, LL, MNKD, MGM, PWR, SKUL, RGR, TJX, TOL, WMB, WPZ.

·         Thursday, 2/23/12: Jobless Claims 8:30 AM. FHFA Housing Index 10 AM. Natty Inventories 10:30 AM. Oil Inventories 11 AM (one-day delay due to holiday). Kansas City Fed Mfg Index 11 AM. 7-Year Note Auction 1 PM.  Fed Balance Sheet and Money Supply 4:30 PM.  Earnings: AIG, AMT, ADSK, CBI, CDE, COR, CROX, DECK, DNR, DCIX, FWLT, GPS, HLS, HRL, IAG, IDCC, IRM, ISLE, KBR, KSS, LINE, MELI, MHK, MCP, NDSN, RBCN, SWY, CRM, SD, SFY, TGT, TASR, TK, TGP, TNK, TGX, TSL, WBMD.

·         Friday, 2/24/12:  Consumer Sentiment 9:55 AM.  New Home Sales 10 AM.  Earnings:  ANR, ALTI, AWK, DDS, FCN, JCP, NEM.

·         Tuesday, 2/28/12: Durable Goods 8:30 AM. Consumer Confidence 10 AM.

·         Wednesday, 2/29/12: Leap Day for Leap Year. GDP 8:30 AM.  EOM. The second traunch for the LTRO program should be decided by today.

·         Thursday, 3/1/12: Jobless Claims and Personal Income and Outlays 8:30 AM.  ISM Mfg Index 10 AM (key data for any energy plays). EU Summit for heads of state in Brussels but these schedules change like the weather.

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

·         Friday, 3/9/12: Monthly Jobs Report 8:30 AM.

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

·         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.

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