Keystone's Key Events and Market Movers Week of 3/12/12

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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:

The SPX has moved thru a 30 point sideways range, 1344-1376, since the early February gap up, about 25 trading days.  The majority of the long traders in this market are complacent, without fear. Do not listen to any analyst or pundit in media waxing worry since the actual indicators show that the bulls are not worried at all and simply expect the good times to last forever. This is proven by the low CPC put/call numbers and low volatility. This lack of fear is a contrarian indication so the markets are ripe for another pull back. Last Tuesday, the negative divergence smack down occurred to satisfy the charts as forecasted.  But prices have recovered to print matching highs again, along with negative divergence again, so expect another spank down for the broad indexes at anytime.

Keybot the Quant, Keystone’s proprietary algorithm, was triggered to the short side on the Tuesday sell off but flipped back to the bull side by Thursday.  Continue to monitor Keybot in the left margin; when Keybot turns bearish, that will tell you the markets are in serious trouble. Until then, the bulls are sipping wine, enjoying the view from this lofty perch.  Watch Keystone’s SPX:VIX Ratio Indicator, now at 80, so market bulls are cruising. Market trouble is indicated if the ratio loses the 68 level so monitor this ratio each day forward. A spike in VIX will drop the ratio quickly.

Earnings continue with more second and lower tier type companies reporting this week.  Biotech and small pharma are themes, also solar stocks. The natty vehicle talk will ramp up with CLNE. URBN provides information on the retail sector ahead of the Retail Sales report on Tuesday morning.  The retail sector is very important this week so watch XRT and RTH.  Keystone continues to dislike the retail sector but waiting for the sell off is like waiting for Godot. This week, however, there may be fireworks in the retail sector. The 10-Year Note Auction is 1 PM Tuesday which will create a market pivot point as well as the FOMC Decision at 2:15 PM.

On Wednesday, Chairman Bernanke speaks before the markets open. The 30-Year Bond Auction is at 1 PM.  Watch the shippers since EGLE will release earnings. The Baltic Dry Index (BDI) has bounced from its precipitous fall recently but with global growth projections continuing to decrease, the sector should remain under moderate pressure.  If the global economic picture is improving, you will see it in the shippers. Many shipping stocks bounced off their bottoms, remember Keystone playing the NAT bounce created by positive divergence? Probably more sideways is ahead for the shippers than anything.  VRA is a heavily shorted stock which keeps the retail sector talk cooking along this week. If VRA earnings are disappointing, the shorts may press and the price may plummet like a stone, however, if earnings blow out to the upside with a beat, the massive amount of shorts may jump into cover and the stock can launch like a rocket, so watch that one mid-week.

On Thursday, PPI and the manufacturing surveys are important.  There appears to be a recent bump higher in manufacturing activity so this data is critical. Keystone believes that the improvements in manufacturing is only due to niche hot markets now such as the shale gas, and not broad-based as the ivory tower economists, while eating jelly donuts each morning resting in high-back leather chairs, proclaim.  ROST earnings will maintain the retail sector activity all week long.

Quadruple Witching Day occurs on Friday, OpEx. Note the way Friday trading finishes since the trend of markets Friday is typically reversed come Monday, 3/19/12. Consumer Sentiment creates a market pivot point at 10 AM-ish Friday morning.

Friday is also a major Bradley turn date, thus, markets are now in a window, this week and next, very susceptible to a market trend change.  The Bradley turns do not forecast direction, only heightened activity that leads to a strong push in the markets one way or the other. Thus, over the coming days, either an obscene melt-up would be expected, or another roll over for markets.  The negative divergence appearing on charts votes for a pullback but the seasonality factors this week are very bull favorable.

High gasoline prices remain a worry and this is the time of year when gasoline prices move up due to winter to summer grade changes as well as scheduled maintenance. Folks need this like they need a hole in their heads because this seasonality will make it more difficult for gasoline prices to fall.  Anecdotal data already show that folks are seeking public transportation and other options to reduce fuel costs; this should not be good for the retail sector but the Energizer Bunny keeps moving retail higher, the retail sector action will be pivotal this week.

Any positive news from the Middle East will cause a large drop in oil since at least about $20 in premium is built into price currently, WTIC had pegged 110 while Brent was over 128.  Oil and the broad markets move together.  Thus, like copper, commodities, gold and silver, if the dollar strengthens this week, this should move oil and the SPX lower.

Continue watching AAPL since as AAPL goes, so goes the markets.  As Keystone pointed out days ago, the Apple charts wanted to see a smack down, which occurred.  Now price has moved back up to print matching and higher highs, with negative divergence again.  Thus, expect AAPL to receive another smack down.  The weekly AAPL chart maintains momo, however, so price will want to play around in this 490-550 zone for a little while before rolling over.

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. Tech leads overall market direction and this was easily apparent in last week’s action. Traders enjoying the technology rally will likely take profits moving forward. A pull back in AAPL will negatively impact the tech sector, Nasdaq, and the broad markets, as well as the 90% of fund and money managers that own the stock.  Traders enjoyed the parabolic ride up in Apple but will not enjoy the topping and rolling over action ahead.

Market bulls have made serious gains in the broad markets in 2012, 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 1290 and NYA 7650. The expected asset relationships were skewed last week so monitor this closely this week.  The dollar and euro dictate the markets, up dollar = down euro = down commodities, copper, gold, silver, oil = down markets and down dollar = up euro = up commodities, copper, gold, silver, oil = up markets.

Key Dates and Times for the Week and Month Ahead:

·         Monday, 3/12/12: The European debt crisis drama continues. Watch Greece, and now, more importantly, Portugal.  Greece, Portugal, Hungary, Spain and Italy all remain at risk. The LTRO2  money pump appears to be largely priced into markets.  Congress in session, as well as continued political rhetoric is a market negative. Listen for any China news since this impacts copper and commodities markets which will cause the equities markets to move in the same direction.  Major Bradley Turn date on Friday, 3/16/12, so watch for a major market trend change in the window between 3/9/12 and 3/23/12, especially the 3/13/12 thru 3/21/12 area.  Interestingly, OpEx week in March is typically a bullish week, up 85% of the time, and the FOMC meeting day this week is up about 75% of the time. Also, for OpEx weeks in general, Mondays tend to be bullish, and the period from Tuesday into Wednesday is typically bullish. The week sets up bullish seasonality-wise but with markets now in a Bradley turn window and the charts negatively diverging, caution is the operative word.  3-Year Note Auction 1 PM. Treasury Budget 2 PM.  Earnings: ALXA, AOB, AWR, AIS, BPAX, CLNE, ENZ, FCEL, IDT, LDK, UEC, URBN.

·         Tuesday, 3/13/12: IMF decides on its contribution to the Euro debt situation (tentative schedule). NFIB Small Business Optimism Index 7:30 AM. Retail Sales 8:30 AM.  Ceridian-UCLA PCI Diesel Fuel Indicator 9 AM. Business Inventories 10 AM. 10-Year Note Auction 1 PM.  FOMC Meeting Announcement 2:15 PM. Earnings: MED, OXGN, PSUN, VIP.

·         Wednesday, 3/14/12: Mortgage Purchase Applications 7 AM. Current Account 8:30 AM. Import and Export prices 8:30 AM. Chairman Bernanke speaks 9 AM. Oil Inventories 10:30 AM. 30-Year Bond Auction 1 PM. Earnings: AFFY, ARNA, EGLE, HOGS, KBH, RUE, VRA.

·         Thursday, 3/15/12: Jobless Claims 8:30 AM. Producer Price Index (PPI) 8:30 AM. Empire State Mfg Survey 8:30 AM. TIC data 9 AM. Philly Fed Survey 10 AM.  Natty Inventories 10:30 AM.  Fed Balance Sheet and Money Supply 4:30 PM.  Earnings: AXAS, HNR, INO, RSOL, ROST, URZ, WGO.

·         Friday, 3/16/12: Quadruple Witching OpEx. Major Bradley Turn date. Consumer Price Index (CPI) 8:30 AM. Industrial Production 9:15 AM-Fed fave to gauge health of manufacturing sector. Consumer Sentiment 9:55 AM.  Earnings: CWCO, TINY, SOL.

·         Tuesday, 3/20/12: Greece deadline for financing. Housing Starts. TIF-see if the wealthy folks are still spending.

·         Thursday, 3/22/12: New Moon. Jobless Claims. FDX. NKE.

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

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