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.
Key Dates and Times for the Week Ahead:
· Keystone’s Comments on the Upcoming Week: The fiscal cliff is 43 days away, 6 weeks. The European news flow directly dictates global market direction. A decision on aid to Greece is to occur on Tuesday, 11/20/12, but do not hold your breath since these dates are continually delayed. The euro will move up and take equities up if a fix is provided to Greece, or, if the date for a decision is pushed forward again, the euro will drop and so will equities. Spain will likely delay their bailout request until December and perhaps a package deal for Spain, Greece and Cyprus will emerge. The ECB’s bond-buying program cannot be unleashed unless Spain requests the bailout but Spain does not want to give up sovereignty by accepting conditionality. Spain elections are on Sunday, 11/25/12. Italy wants Spain to request a bailout since the ECB bond-buying will immediately improve Italy’s debt situation. Look for a strong market bounce and rally when Spain requests a bailout. The SPX is now below the 1403 level where the ECB’s OMT bond-buying program was announced. A flight of deposits out of Greece, Spain and Italy is ongoing which may lead to bank runs. European riots and violence are increasing and worrisome with events occurring in Greece, Portugal, Spain, Italy and France. Merkel and other German leaders are now targets of protestors. The banking union is very important but European leaders are not making progress. Merkel likely wants Greece to stay in the euro until her election in the Fall 2013. The next ECB Rate Decision and Press Conference is 12/6/12. Europe must cut rates to weaken the euro and help the Eurozone grow out of the debt mess. If the ECB cuts, the euro will drop and so should equities. If the ECB stands pat, the euro and equities markets will be flat to up. Watch for further China easing measures such as lowering rates or triple R’s, which will bounce copper, commodities and equity markets, but, do not hold your breath. China appears hesitant to act since they correctly worry about the commodities inflation and asset bubbles that will be created (Chairman Bernanke incorrectly defends QE saying it does not create asset bubbles). New leaders President Xi Jinping and Premier Li Keqiang will not supply economic targets until spring time. A weak global economy is driving the oil price lower but the Iran-Hamas War and Middle East violence wants to take oil prices higher. Brent oil is increasing in price far more than WTIC due to the unrest. The SPX typically moves in the same direction as oil. The two key earnings releases this week are LOW and DE which will provide insight into the potential housing recovery and a gauge on global economic health, respectively. Earnings in general are meeting the lowered estimates although the weak top lines are occurring across all sectors; people simply are not spending the money they did a couple quarters ago. Major companies are canning workers which will help those stock prices short term but the ramifications to the economy over the intermediate and longer term are worrisome. Further, many stock buyback announcements are occurring, which may provide a ST bounce to stock price, however, buy-backs typically result in lower stock prices two or three months out (since buy-backs are a phony-baloney game to keep the stock price elevated). The weak copper, utilities, transportation stocks, shipping sector and tech and semiconductor industries indicate a weak global economy. The weak behavior in the tech (COMPQ) and small cap (RUT) market leaders also signals extended trouble. Watch AAPL closely moving forward since it has a huge impact on tech and the markets. As AAPL goes, so goes the markets. The VIX was climbing in recent weeks but dropped under 17 last week. The VIX is expected to move higher which will lead to large and wild intraday and day-to-day swings in the equity markets. Congress will attempt to address the fiscal cliff issue between Thanksgiving and Christmas. Congress and the President are creating market negativity on a continual basis moving forward due to the fiscal cliff drama and worries of a potential downgrade of U.S. debt. Keystone’s Eclipse Indicator targets this period from now thru the end of the year as having potential for a large market selloff, especially the period between Thanksgiving and Christmas. A Bradley turn date occurred on 11/14/12 so a window remains open for a trend to emerge this week, committing to either an upside recovery rally, or, a downside acceleration. Seasonality-wise, the markets tend to be bullish on Tuesday afternoon and Wednesday into the Thanksgiving holiday.
· Monday, 11/19/12: Housing Market Index and Existing Home Sales 10 AM-look for a market pivot point. The Monday’s after OpEx Friday tend to move opposite of Friday’s action so this hints at market weakness. A Bradley turn window remains open into Thanksgiving so remain alert for markets to choose a direction this week, either a true recover rally, or, downside acceleration. Earnings: A, BOBE, DCIX-shipping, HAST, HRT, JACK, KKD, LDK, LOW-housing indicator, NUAN, PBT, SABA, STP, TSN, URBN.
· Tuesday, 11/20/12: Spain bill auction. Greece decision is promised today for the umpteenth time-watch the euro; up euro=up markets, down euro=down markets. Housing Starts 8:30 AM. Fed’s Lacker speaks 9 AM. Chairman Bernanke speaks at 12:15 PM. Markets tend to be bullish for the two days before a holiday, so perhaps a Tuesday low will occur leading to buoyancy into Turkey Day. Earnings: BBY, BWS, CPB, CHS, CRM, DSX-shipping, EXM-shipping, HNZ, HPQ, HRL, JKS, MDT, SOL, TSL, VAL, ZLC.
· Wednesday, 11/21/12: Spain bond auction. Mortgage Purchase Applications 7 AM. Jobless Claims 8:30 AM. Manufacturing Flash PMI 8:58 AM. Consumer Sentiment 9:55 AM-look for a market pivot point at 9:55-10:00 AM. Leading Indicators 10 AM. Oil Inventories 10:30 AM. Natty Gas Inventories 11 AM. 10-Year TIPS Auction 11:30 AM. Earnings: DE-global economic indicator, P.
· Thursday, 11/22/12: EU Leaders Summit. Eurozone PMI’s-watch the euro. Thanksgiving Day holiday, U.S. markets are closed.
· Friday, 11/23//12: U.S markets close early at 1 PM. Black Friday shopping day, so-named since many retailers turn profitable (the books go into the black) on the year today. Black Friday used to be the largest day for retail sales for the year but in recent years the Saturday before Christmas has taken this honor although Black Friday remains as one of the top five retail sales days each year.
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· Sunday, 11/25/12: Catalonia regional elections.
· Monday, 11/26/12: Chicago Fed Activity Index 8:30 AM. Dallas Fed Mfg Index 10:30 AM. Cyber Monday marks a large increase in on-line purchasing of holiday gifts.
· Tuesday, 11/27/12: Spain bill auction and Italy bond auction. Durable Goods 8:30 AM. Case-Shiller House Price Index 9 AM. FHFA House Price Index, Richmond Fed Manufacturing Index and Consumer Confidence 10 AM.
· Wednesday, 11/28/12: Italy bill auction. Fed’s Pianalto speaks. New Home Sales 10 AM. Oil Inventories 10:30 AM. 2-Year Note Auction 1 PM. Beige Book 2 PM.
· Thursday, 11/29/12: Italy bond auction. Jobless Claims and GDP 8:30 AM. Pending Home Sales Index 10 AM. Natty Gas Inventories 10:30 AM. Kansas City Manufacturing Index 11 AM. 5-Year Note Auction 1 PM.
· Friday, 11/30/12: EOM. Personal Income and Outlays 8:30 AM. Chicago PMI 9:45 AM. Farm Prices 3 PM.
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· Thursday, 12/6/12: BOE Rate Decision 7:00 AM EST. ECB Rate Decision 7:45 AM EST and Press Conference 8:30 AM.
· Tuesday, 12/11/12: FOMC meeting begins.
· Wednesday, 12/12/12: FOMC Rate Decision, Forecasts and Press Conference at 12:30 PM, 2 PM and 2:15 PM, respectively. Expect market pivot points especially at 12:30 PM and after 2 PM.
· Sunday, 12/16/12: Japan election; watch the dollar/yen.
· Saturday, 12/22/12: Major Bradley turn date so a turn window opens for a significant market trend change to occur between 12/14/12 and 12/28/12. This matches Keystone’s Eclipse Indicator that identifies the November-December period as having a high potential for a large market selloff especially from Thanksgiving thru the end of the year.
· Monday, 12/24/12: Christmas Eve. Markets close early at 1 PM.
· Tuesday, 12/25/12: Christmas Day. Markets are closed.
· Monday, 12/31/12: Last day of trading for 2012.
---------------------------- 2013 ----------------------------------
· Tuesday, 1/1/13: New Years Day. Markets are closed. ESM is officially open for business but ‘will not be fully operational’.
· Wednesday, 1/2/13: If Congress does not act, the U.S. drives off the “massive fiscal cliff” (a phrase coined by Chairman Bernanke in early 2012) that will cut the GDP, increase unemployment and immediately launch the country into recession, but, on the positive side, the nation’s debt will decrease. Chairman Bernanke stated that the Fed does not have the tools to help should the fiscal cliff occur.
· In February or March: New China President Xi Jinping and Premier Li Keqiang take over complete control and the ten-year transition of power is finished. China now sets inflation and budget targets moving forward.
---------------------------- 2014 ----------------------------------
· Wednesday, 1/1/14: ESM is officially ‘fully operational’.
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