Keystone's Key Events and Market Movers for Trading the Week of 11/26/12

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 only 36 days away, 5 weeks.  The European news flow directly dictates global market direction. A decision on aid to Greece is to occur on Monday, 11/26/12, but do not hold your breath since these dates are continually delayed. The euro moves up on happy Euro news which takes the equity markets higher. A lower euro on bad news takes markets lower. Spain will likely delay their bailout request until December and perhaps later since a package deal for Spain, Greece and Cyprus may 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 moved back above 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. 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 September. 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 move 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 supply economic targets in March.  A weak global economy is driving the oil price lower but the Iran-Hamas War and Egypt and Middle East violence wants to take oil prices higher.  Brent oil is increasing in price far more than WTIC due to the unrest. Watch the Brent 111 level to gauge the action. The SPX typically moves in the same direction as oil.  The earnings releases are petering away this week although the retailers are in focus on Monday, Wednesday and Friday, so keep an eye on the XRT and RTH to gauge the action.  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. However, the semi’s, technology, retail and financials were the main drivers of the big rally last week. Tech (COMPQ) and small caps (RUT) will lead the markets and verify the direction of the broad indexes.  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 last week from 18 to 15.  The low volatility is the major cause of the market rally more so than the sectors listed above.  Watch the VIX.  Under 15 and the bulls will rule the markets, over 15, 16 and heading higher will signal a return of the market selling. Congress will attempt to address the fiscal cliff issue between now 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 high potential for a large market selloff, just like the period in late October early November which did result in a strong market selloff. Sometimes the initial move for these eclipse windows, however, will burn all the negative energy off.  A full moon and lunar eclipse occurs on Wednesday evening. Markets tend to be buoyant in front of a full moon. The lunar eclipse this week and increasing solar flare activity moving forward may create heightened anxiety and odd behavior in humans on a metaphysical level which tends to affect trading negatively. The key events this week are the Spain elections Sunday evening, Greece decision on Monday, fiscal cliff talks all week long, Chairman Bernanke and Consumer Confidence on Tuesday, the Beige Book on Wednesday afternoon and GDP on Thursday morning. Manufacturing data, housing data, retail earnings and Fed speak all week long are also important.

·         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 kicks off the on-line holiday gift purchasing. Earnings: BIG, EXM-shipper, GRZ, JOSB, PBT, PER, TEA.

·         Tuesday, 11/27/12: Spain bill auction and Italy bond auction. Fed’s Fisher speaks 6 AM. Fed’s Lockhart speaks 6:30 AM. Chairman Bernanke speaks 8:30 AM.  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-expect a market pivot point.  Egypt protest begins at 10 AM EST so videos of riots from Cairo on television may create market turmoil. 2-Year Note Auction 1 PM. Markets tend to be buoyant moving into the full moon. Earnings: PVH, GAME.

·         Wednesday, 11/28/12: Italy bill auction. Fed’s Pianalto speaks. Mortgage Purchase Applications 7 AM. New Home Sales 10 AM. Oil Inventories 10:30 AM. Fed’s Tarullo 12:15 PM. 5-Year Note Auction 1 PM. Beige Book 2 PM-expect a market pivot point. Full moon and lunar eclipse. Earnings: ARO, AEO, ANN, TFM, GES, JASO, PLL-global economic indicator, RUE, SPLK, SPH, TIVO, YGE.

·         Thursday, 11/29/12: Italy bond auction. Fed’s Fisher speaks 6 AM. Chain Store Sales. Corporate Profits, 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. 7-Year Note Auction 1 PM. Earnings: BKS, CBK, FIVE, KR, LZB, PSUN, TIF, ULTA, YOKU, ZUMZ.

·         Friday, 11/30//12: EOM. Personal Income and Outlays 8:30 AM.  Chicago PMI 9:45 AM. Farm Prices 3 PM. Fed’s Kocherlakota speaks 5 PM.  Earnings: SOL, SIGM, UNFI.

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·         Monday, 12/3/12:  ISM Manufacturing Index 10 AM-expect a market pivot point.

·         Thursday, 12/6/12: BOE Rate Decision 7:00 AM EST. ECB Rate Decision 7:45 AM EST and Press Conference 8:30 AM.

·         Friday, 12/7/12:  Monthly Jobs Report 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.

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·         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.

·         In September:  Merkel (Germany) seeks re-election and will not want Greece to exit the euro before the election, but will not care afterwards.  Perhaps Greece and Germany will both exit the euro in the future.

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·         Wednesday, 1/1/14: ESM is officially ‘fully operational’.