Keystone's Key Events and Market Movers for Trading the Week of 12/17/12

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: There are only ten trading days remaining in 2012. The fiscal cliff is only 15 days away and each political sound bite moves the markets in real time. A positive resolution is likely priced in since the markets are not moving substantially lower on the bad news; traders are willing to provide the benefit of the doubt, for now. Time is expired from the standpoint of performing the legislative and administrative tasks to prepare the bill so a resolution has to be announced immediately. Congress leaves for vacation and the president wants to go to Hawaii on or before 12/23/12, a few days away. The European news flow directly dictates global market direction. Euro up = up markets. Euro down = down markets. The euro is parked at an inflection point at 1.3160 so the pivot from this price will dictate broad market direction. 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 and 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. The development of a European banking union is important.  Merkel likely wants Greece to stay in the euro until her election in September. The next ECB Rate Decision and Press Conference is 1/10/13.  A cut is expected in early 2013 likely January or February. 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.   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 China continues to provide lip service about easing measures and the markets bite each time raising copper, commodities, and equities,all on promises. (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 and confessional season will begin so listen for any companies that start to warn of lower numbers.  There are several key bellwether companies reporting this week that provide a gauge on the economy as highlighted below.  Tech (COMPQ) and small caps (RUT) lead the markets and verify the direction of the broad indexes.  Watch AAPL closely moving forward, especially the 505 support level, since it has a huge impact on tech and the markets. As AAPL goes, so goes the markets.  Volatility moved higher last week with the VIX moving above 17. A higher VIX will lead to larger intraday and day-top-day point moves for the indexes. For OpEx week, Monday is typically a bullish day.  On OpEx Tuesday’s, markets typically print a low and then run higher into a Wednesday high. On the esoteric side, a Major Bradley turn date occurs on Saturday, 12/22/12.  Thus, a Bradley window is open from now thru 12/28 for a major market move in one direction or the other. The moves typically occur closer towards the actual turn date, and considering that Christmas Eve is a shortened session next Monday with the markets closed on Tuesday, there may be real fireworks in the markets this week between Tuesday and Friday.   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. And who can forget that the Mayan calendar says the end of days is on Friday, 12/21/12.

·         Sunday, 12/16/12: Japan election; watch the dollar/yen.

·         Monday, 12/17/12: Egypt turmoil continues with the vote on the Draft Constitution continuing into next weekend.  The riots and violence may increase. Markets are driven by the Fiscal Cliff, European debt crisis and Egypt and Syria dramas. Empire State Manufacturing Survey 8:30 AM.  TIC data to gauge foreign investment. Fed’s Lacker, the dissenting voting member, speaks 12:30 PM.  2-Year Note Auction 1 PM. OpEx Monday’s tend to be bullish. A major Bradley turn window is open for this week where a large market move in either direction may occur. Earnings: DMND, EXM.

·         Tuesday, 12/18/12:  Current Account 8:30 AM. Housing Market Index 10 AM. 5-Year Note Auction 1 PM. Fed’s Fisher speaks 1:15 PM.  OpEx Tuesday’s typically experience a low where the markets then run into a Wednesday high. Earnings: JEF, ORCL, SAFM.

·         Wednesday, 12/19/12:  Mortgage Purchase Applications 7 AM. Housing Starts 8:30 AM. Oil Inventories 10:30 AM. 7-Year Note Auction 1 PM.  Earnings: ACN, BBBY, FDX-shipping indicator, GIS, MLHR-furniture is a gauge for the economy, JBL, NAV, PAYX, SABA, SCS.

·         Thursday, 12/20/12: Corporate Profits, Jobless Claims and GDP 8:30 AM.  Existing Home Sales, Philly Fed Survey, FHFA House Price Index and Leading Indicators 10 AM-a market pivot point will occur. Natty Gas Inventories 10:30 AM. 5-Year TIPS Auction 1 PM. Earnings: CCL, CTAS-uniforms are a gauge of the economy, DRI-indicates discretionary spending, DFS, FCEL, KBH-housing, MU, NKE, RHT, RAD, RIMM, SHAW, TIBX, WGO.

·         Friday, 12/21/12: OpEx. Quadruple Witching. First Day of Winter. Chicago Fed National Activity Index, Personal Income and Outlays and Durable Goods Orders 8:30 AM. Consumer Sentiment 9:55 AM-a market pivot point will occur. Kansas City Manufacturing Index 11 AM. Mayan End-of-Days Calendar date. Earnings:  WAG.

·         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. Keystone’s Eclipse Indicator identifies this period, the remaining days of the year, as having a high potential for a large market selloff.

·         Sunday, 12/23/12: Congress wants to leave for vacation and the president wants to go to Hawaii—will the fiscal cliff be resolved?

·         Monday, 12/24/12: Christmas Eve. U.S. markets close early at 1 PM. Durable Goods.

·         Tuesday, 12/25/12: Christmas Day. U.S. markets are closed.

·         Wednesday, 12/26/12: Kwanzaa. U.S. markets reopen for trading.

·         Thursday, 12/27/12: Consumer Confidence.

·         Monday, 12/31/12: EOM, EOQ4, EOH2, EOY2012. 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. First day of trading for 2013. ISM Mfg Index 10 AM.  FOMC Minutes 2:15 PM.

·         Friday, 1/4/13: Monthly Jobs Report 8:30 AM.

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·         On Monday, 1/21/13: Presidential Inauguration, Martin Luther King Day. The president does not want a fiscal cliff mess and fiasco hanging over him on this day so it serves as an absolute deadline for the fiscal cliff and debt ceiling resolution.

·         In February:  Debt Ceiling limit is hit.

·         In February: Italy elections.

·         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.

----------------------------  2014  ----------------------------------

·         In March 2014: ESM is officially ‘fully operational’. The banking union schedule has been delayed from January 2013 to January 2014 and now to March 2014.