Keystone's Key Events and Market Movers for Trading the Week of 1/14/13

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: Chairman Bernanke speaks Monday evening after the markets close and his words will impact Tuesday trading.  Retail Sales on Tuesday morning will have an enormous impact on markets, ditto the earnings from the financials, BAC, C, JPM, and others, also bellwether GE on Friday morning.  LEN will provide input into the health of the housing recovery and tech is also on tap with INTC earnings. The Beige Book will shake things up on Wednesday afternoon. The housing recovery receives further scrutiny with the Housing Starts data.  Consumer Sentiment on Friday is also important.  The next political deadlines are the debt ceiling in February, then the Sequester, then the Continuing Resolution. The ongoing political circus will likely negatively impact markets moving forward. Lots of Fed talk is on tap for this week.  Kocherlakota must be getting paid per gig since he speaks three times.  The European debt crisis news directly dictates global market direction.  Draghi did not cut rates last week so the euro exploded higher and up euro means up markets. As the euro goes, so goes the equity markets. Spain is delaying their bailout request so the ECB’s OMT bond-buying program cannot be unleashed.  Spain is reluctant 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 if Spain requests a bailout. A flight of deposits out of Greece, Spain and Italy is ongoing which may lead to bank runs. European riots and violence continue. The slow-motion development of a European banking union continues.  Merkel likely wants Greece to stay in the euro until her election in September. The next ECB Rate Decision and Press Conference is 2/7/13.  A cut was expected in early 2013, however, Draghi gave the impression a rate cut is nowhere near so perhaps summer time may be the target.  If the European economy continues to falter, however, Draghi will change his tune quickly.  Europe must cut rates to weaken the euro and help the Eurozone grow out of the debt mess. Euro up = up equities. Euro down = down equities.    The China hard versus soft landing saga continues. 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). China continues to provide lip service about easing measures and the markets bite each time raising copper, commodities, and equities, all on promises. New leaders President Xi Jinping and Premier Li Keqiang will supply economic targets in March. China professes a 7.5% growth rate but no one asks how this is possible when their number one customer, Europe, is in recession and depression, the U.S. is flat and uninhabited cities litter the China countryside, waiting for the urban shift to a domestic-led economy.  Perhaps the simple reason is the fudged growth numbers.  A major data dump occurs at the end of the week so this will provide drama on Friday.   A weak global economy is driving the oil price lower but Middle East turmoil wants to take oil prices higher. Syria remains a mess with tens of thousands of people dead. Egypt remains shaky. Ditto Iran. Use the WTIC oil 90 and Brent oil 110 as pivot points. The bulls have enjoyed the top side of these pivots in recent days and the equity markets are bullish as well. The Middle East violence is not a major concern in the context of oil price if Brent stays around or under 110. The SPX typically moves in the same direction as oil so higher oil means higher markets and lower oil means a move more towards disinflation and deflation, and slower global growth, and lower markets. As oil goes, so goes the markets.  The earnings season begins in full swing this week with banks the major focus along with tech.  The WFC earnings resulted in a lower financial sector on Friday so it is key to see if this behavior continues this week, or not.  The markets cannot rally unless the financials provide blow-out earnings this week.  Tech (COMPQ) and small caps (RUT) lead the markets and verify the direction of the broad indexes.  Last week the small caps ran out of gas hinting that the initial strong move higher to start the year perhaps had more to do with the wild short-covering rallies seen in speculative stocks.  Watch AAPL closely moving forward as it starts to favor a sideways channel thru 500-550.  As AAPL goes, so goes the markets.  Volatility remains low under 14.   The CPC put/call is 0.72. The VIX and CPC verify the ongoing complacency in the markets.  Traders never doubted the positive outcome for the fiscal cliff and continue to believe that markets will travel higher without worry.  A Bradley turn occurs 1/20/13 so a window opens for a potential trend change in the markets between 1/14/13 and 1/25/13.  During OpEx weeks, a Tuesday low typically leads to a Wednesday high.  A three-day holiday weekend occurs next weekend so Thursday and Friday would tend to be bullish. Based purely on the seasonality factors and the negative divergence in the charts, the guess would be down Monday into a low on Tuesday, then a bounce into Wednesday, then more down into a low on Thursday late morning or early afternoon, then buoyancy into the holiday weekend.

·         Monday, 1/14/12: Fed’s Williams speaks 11:55 AM.  Fed’s Lockhart speaks 12:40 PM.  Chairman Bernanke speaks and takes questions 4:30 PM EST impacting AH’s trading, futures and Forex. A Bradley turn window opens for the next ten trading days for a market trend change to occur, more likely 1/16 thru 1/23. Earnings: ED, FUL, PPG-chemicals are the building blocks of a healthy economy, UNB.

·         Tuesday, 1/15/13: Fed’s Rosengren speaks 8 AM. Empire State Mfg Survey, PPI and Retail Sales 8:30 AM. Fed’s Kocherlakota speaks 8:50 AM.  Fed’s Plosser speaks 9:30 AM. Business Inventories 10 AM-a market pivot point. During OpEx week, there is typically a Tuesday low that will lead to a Wednesday high. Earnings: FRX, LEN-housing.

·         Wednesday, 1/16/13: Brazil rate decision. Mortgage Applications 7 AM.  CPI 8:30 AM.  TIC Data 9 AM. Industrial Production 9:15 AM. Housing Market Index 10 AM. Fed’s Kocherlakkota speaks 10 AM. Oil Inventories 10:30 AM.  Beige Book 2 PM-market pivot point. Fed’s Fisher speaks 6:30 PM. Fed’s Kocherlakota speaks 8 PM. Earnings: BK-bank, EBAY-tech, FRC, GS-bank, JPM-bank, KMP, MTB, USB.

·         Thursday, 1/17/13: Jobless Claims and Housing Starts 8:30 AM.  Philly Fed 10 AM-markets should take a stutter step. Natty Gas Inventories 10:30 AM. Fed’s Lockhart speaks 12:05 PM. Markets are typically buoyant moving into a three-day holiday weekend. Earnings: AXP, APH, BAC-bank, BBT, BLK, COF, C-bank, FAST, HBAN, IGTE, INTC-tech, PNC, UNH.

·         Friday, 1/18/13: China GDP, Retail Sales, Housing and Production data-will impact copper, oil and commodities.  OpEx.  Consumer Sentiment 9:55 AM-markets will pivot. Markets are typically buoyant moving into a three-day holiday weekend. Trading will resume on Tuesday. Earnings: FHN, GE-bellwether, JCI, MMR, MS-bank, PH, SANM, SLB, STT, STI, XLNX.

·         Sunday, 1/20/13: BOJ provides a plan. Germany Lower Saxony regional elections begin the Merkel re-election drama. Bradley turn today. A Bradley window is open for a market trend change to occur between 1/14/13 and 1/25/13, more likely 1/16 thru 1/23.

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·         Monday, 1/21/13: U.S. Markets are Closed in Observance of Dr. Martin Luther King Day. Presidential Inauguration. The president will have the debt ceiling, sequester and continuing resolution hanging over his head as he assumes the oath of office.

·         Tuesday, 1/22/13: U.S. Markets are Open for Trading.

·         Wednesday, 1/23/13: AAPL earnings-consensus is $13 EPS and 55 billion top line but Street wants $16 and over 57 billion.

·         Friday, 1/25/13: New Home Sales 10 AM.

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·         Monday, 1/28/13: Durable Goods 8:30 AM.

·         Tuesday, 1/29/13: FOMC Meeting begins. Consumer Confidence 10 AM.

·         Wednesday, 1/30/13: GDP 8:30 AM. FOMC Rate Decision 2:15 PM.

·         Thursday, 1/31/13: EOM.

·         Friday, 2/1/13: Monthly Jobs Report 8:30 AM. PMI Index 8:58 AM. Consumer Sentiment 9:55 AM.  ISM Mfg Index 10 AM.

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·         Tuesday, 2/12/13: President Obama’s State of the Union address. Markets are usually buoyant the following day.

·         In February:  16.4 trillion 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.

·         Friday, 3/1/13: Sequestration hits with one trillion in automatic spending cuts for government.

·         Wednesday, 3/27/13: Continuing Resolution is required to fund the government.

·         In March and April:  The BOJ head’s will be replaced and strong QE will likely occur. Perhaps a low in the Nikkei in January or February may provide a point of entry ahead of the money-pumping?

·         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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·         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.