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 22 days away. The FOMC Rate Decision and Press Conference is Wednesday afternoon. Retail Sales are Thursday morning. The European news flow directly dictates global market direction. Euro up = up markets. Euro down = down markets. 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. The next ECB Rate Decision and Press Conference is 1/10/12. 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. JOY, a key global economic bellwether, reports this week so pay attention to those earnings. 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. A higher VIX will lead to larger intraday and day-top-day point moves for the indexes. The VIX 15.82 level will directly dictate broad market direction at Monday morning’s opening bell. Bulls win if the VIX drops under 15.82. Bears win if the VIX stays above 15.82. 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. In general, the market is pricing in a positive outcome so the risk appears to be to the downside. Congress leaves for vacation and the president wants to go to Hawaii on or before 12/23/12 so this date serves as a deadline, now only 13 days away. This week is very important for the fiscal cliff drama. 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 new moon occurs on Thursday evening and markets tend to be weak moving into the new moon. This behavior goes counter to the anticipated QE 4 coming (to replace Operation Twist) on Wednesday afternoon which should bounce markets. Perhaps a surprise occurs on Wednesday afternoon? Tax-loss selling occurs at this time in early December and more selling to avoid higher 2013 taxes may also be on tap this week.
· Sunday, 12/9/12: Happy Hanukkah. Egypt turmoil continues.
· Monday, 12/10/12: There are no economic data or notable earnings releases today, Markets are driven by the Fiscal Cliff, European debt crisis and Egypt and Syria dramas. Earnings: FGP, IHT, PPHM, RICK, SABA, TEA, UEC, WGO.
· Tuesday, 12/11/12: FOMC meeting begins. International Trade 8:30 AM. Wholesale Trade 10 AM-watch for a market stutter step. 3-Year Note Auction 1 PM. Earnings: DG, EXM, PRLS, PURE.
· Wednesday, 12/12/12: Mortgage Purchase Applications 7 AM. Import and Export Prices 8:30 AM. Oil Inventories 10:30 AM. 10-Year Note Auction 11:30 AM. FOMC Rate Decision 12:30 PM, Forecasts 2 PM and Press Conference 2:15 PM, respectively. Expect market pivot points especially at 12:30 PM and after 2 PM. Chairman Bernanke is to announce the new QE plan to replace Operation Twist that ends in two weeks. Markets tend to favor the sell side moving into the new moon. Earnings: COST, JOY-global bellwether, MNR, RH.
· Thursday, 12/13/12: Jobless Claims, PPI and Retail Sales 8:30 AM. Business Inventories 10 AM-look for a market stutter step. Natty Gas Inventories 10:30 AM. 30-Year Bond Auction 1 PM. New Moon. Earnings: ADBE, CIEN, HOV, PAY, PIR.
· Friday, 12/14/12: CPI 8:30 AM. Industrial Production 9:15 AM.
· Saturday, 12/15/12: The vote on the Draft Constitution for Egypt is scheduled.
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· Sunday, 12/16/12: Japan election; watch the dollar/yen.
· Wednesday, 12/19/12: Housing Starts 8:30 AM.
· Thursday, 12/20/12: Jobless Claims and GDP 8:30 AM. Philly Fed 10 AM.
· Friday, 12/21/12: OpEx Quadruple Witching. Consumer Sentiment 9:55 AM.
· 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 this December period, finishing out 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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· 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 ----------------------------------
· Wednesday, 1/1/14: ESM is officially ‘fully operational’.
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