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

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 29 days away. Secretary Geithner’s comments on the Sunday morning talk shows, the ISM on Monday morning, the ECB on Thursday morning and the Monthly Jobs Report on Friday morning are the key events for this week. The European news flow directly dictates global market direction. The euro moves up on happy European news which takes the equity markets higher. A lower euro on bad news takes markets lower. The ECB Rate Decision and Press Conference is early Thursday morning U.S. East Coast time.  A cut is not expected, the ECB does not have much room to cut anyway, but if a cut occurs, the euro will drop and so will equities markets.  If no cut occurs, the euro will move flat to up as well as the markets. Europe must cut rates to weaken the euro and help the Eurozone grow out of the debt mess. Spain will likely delay their bailout request until early 2013. The ECB’s bond-buying program cannot be unleashed unless Spain requests the bailout but Spain does not want to give up sovereignty an accept conditionality.  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 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 across the Eurozone. 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.  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.  The Middle East violence is not a major concern in the context of oil price if Brent stays under 111. The SPX typically moves in the same direction as oil.  The earnings season winds down although TOL results are important for the housing sector and FLOW is important to gauge engineering and infrastructure spending.  Tech (COMPQ) and small caps (RUT) 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 October-November but moved lower towards complacency the last couple weeks. On Friday, the VIX moved above 16. A higher VIX will lead to larger intraday and day-top-day point moves for the indexes.  Congress will attempt to address the fiscal cliff issue during the next three weeks.  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. If a weak cheesy deal occurs that involves can-kicking, the markets will likely sell off since the possibility of a debt downgrade occurring will be higher.  Congress leaves for vacation on 12/23/12 so this date serves as a deadline. 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.

·         Sunday, 12/2/12: Secretary Geithner appears on the Sunday morning political television shows to discuss the fiscal cliff negotiations.

·         Monday, 12/3/12: PMI Manufacturing Index 8:58 AM. Construction Spending and ISM Manufacturing Index 10 AM-expect a market pivot point. Fed’s Bullard speaks 1:40 PM. Earnings: EXM-shipping, GRZ, LDK, PBY, PBT, SABA, STP, VALU.

·         Tuesday, 12/4/12: Motor Vehicle Sales. Earnings: AVAV, AZO, BIG, P, TOL, MTN.

·         Wednesday, 12/5/12:  Mortgage Purchase Applications 7 AM. ADP Employment Report 8:15 AM. Productivity and Costs 8:30 AM. Factory Orders and ISM Non-Manufacturing Index 10 AM-markets should stutter step.  Oil Inventories 10:30 AM. Earnings: ASNA, FNSR, MW, SAI, SIGM, VRA, VRNT.

·         Thursday, 12/6/12: BOE Rate Decision 7:00 AM EST. ECB Rate Decision 7:45 AM EST and Press Conference 8:30 AM. No cut means euro flat to up with equities markets up, a rate cut means lower euro and lower equity markets. Challenger Jo-Cut Report 7:30 AM. Jobless Claims 8:30 AM.  Natty Gas Inventories 10:30 AM. Earnings: COO, FGP, FLOW, HRB, LAYN, LULU, SFD, TITN.

·         Friday, 12/7/12: Monster Employment Index. Monthly Jobs Report 8:30 AM.  Consumer Sentiment 9:55 AM.  Consumer Credit 3 PM. Earnings: MAYS, KMG.

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·         Tuesday, 12/11/12: FOMC meeting begins. International Trade 8:30 AM.

·         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.

·         Thursday, 12/13/12: Jobless Claims, PPI and Retail Sales 8:30 AM. New moon.

·         Friday, 12/14/12: CPI 8:30 AM. Industrial Production 9:15 AM.

·         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 (up or down) between 12/14/12 and 12/28/12. This matches Keystone’s Eclipse Indicator that identifies the December period as having a high potential for a large market selloff.

·         Sunday, 12/23/12: Congress leaves for vacation—will the fiscal cliff be resolved?

·         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.

·         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’.