Keystone's Key Events and Market Movers for Trading the Week of 1/22/13

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: This week is the lollapalooza of earnings. Major heavy hitters are on tap and AAPL’s results alone can very well dictate broad market direction for the next month or two. There is also manufacturing data hitting all week long which is equally important. The next political deadlines are the debt ceiling in February, then the Sequester, then the Continuing Resolution. The rumor about an extension of the debt ceiling last Thursday was the fuel that launched the market. Traders no longer appear worried about any market downside occurring due to the political deadlines. The politico’s have met two deadlines now with a vote to extend the debt ceiling deadline on tap this week so traders now believe that all deadlines will be met with can-kicking.  Of course, if a stumble occurs, it would impact markets more greatly due to the complacency now in place. The European debt crisis news directly dictates global market direction.  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 in full force, although simply having the OMT in place has greatly calmed Europe.  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 with shooting now occurring in Greece. 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, and in fact, directly after the ECB meeting, European automobile sales went off a cliff.  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. As copper and commodities go, so goes the markets.  China appears hesitant to act further (they have been pumping their markets for the last few years) 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 7.8% 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. China demographics are a mess due to the multi-decade one-child policy now causing a lack of workers to fuel economic health. With all their reported high growth, and considering it is winter time, why is their diesel imports dropping? No wonder that many question the validity of the China data. 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. Now the Algerian hostage situation further fuels unrest across Northern Africa. Sad to say, but the case can be made to see a world war brewing which will take place across Northern Africa and throughout the Middle East. Use the WTIC oil 94 and Brent oil 110 as pivot points. WTIC is at 95 on the verge of breaking out to the upside. The Middle East violence is not a major concern in the context of oil price if Brent stays around or under 110. As Brent oil climbs above 110, that provides a gauge on how intense the Middle East unrest is becoming. 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 hits in force this week with many Dow Industrial stocks reporting.   Tech (COMPQ) and small caps (RUT) lead the markets and verify the direction of the broad indexes. The small caps are enjoying a nice run which is also expected seasonality-wise. Watch AAPL earnings closely on Wednesday after the bell since the fate of the markets may rest on its shoulders.   As AAPL goes, so goes the markets.  Volatility is now at a six-year low.    The CPC put/call is 0.75. The VIX and CPC verify the ongoing complacency in the markets.  Traders never doubted the positive outcome for the fiscal cliff and now the debt ceiling and continue to believe that markets will travel higher without worry or fear.  A Bradley turn occurred 1/20/13 so a window is open this week for a trend change to occur in the markets. The typical expected outcome would be a market reversal, although the Bradley does not predict direction, therefore, a melt-up, must be considered. Simply remain alert as the holiday-shortened four-day trading week plays out. Wednesday at 4 PM EST (Apple) is likely ground zero.

·         Monday, 1/21/12: U.S. Markets are Closed in Observance of Dr. Martin Luther King Day. BOJ provides a plan for stimulus moving forward (weakening the yen which boosts dollar/yen pair) perhaps targeting a 2% inflation rate. Presidential Inauguration today. A Bradley turn window is open for a market trend change to occur this week. Earnings: AEP, ETN, RHI, UNB, WERN.

·         Tuesday, 1/22/13: U.S. Markets Open for Trading. Chicago Fed Activity Index 8:30 AM. Richmond Fed Mfg Index and Existing Home Sales 10 AM-markets will take a stutter step. Earnings: AMD, AMTD, ALB, CREE, CSX,  DAL, DD, FCX, GOOG-data on mobile is key, IBM, IGT, JNJ, ISRG, KSU, NSC, PKG, RF, RFMD, SNV, TXN, TRV, VZ, WAT.

·         Wednesday, 1/23/13: World Economic Forum begins in Davos. Mortgage Applications 7 AM.  House Price Index 9 AM. A vote will likely occur to extend the debt ceiling. Earnings: AAPL earnings-consensus is $13 (13.44) EPS and 55 (54.6) billion top line but Street will want $16 and over 57 billion-Apple will likely log the first drop in profits since 2003?, ABT, APD, ATI, COH, CCI, FFIV, GD, GHL, JEC, LSI, MCD, NFLX, NE, PX, SNDK, STJ, SYK, SWFT, SYMC, TER, TXT, URI, UTX, VAR, WLP, WDC, ZZ.

·         Thursday, 1/24/13: China Flash PMI will affect copper and commodities which will push the broad markets in the same direction. Jobless Claims 8:30 AM.  Flash PMI Mfg Index 8:58 AM. Leading Indicators 10 AM-markets will take a stutter step. Natty Gas Inventories 10:30 AM. Oil Inventories 11 AM (one-day delay due to holiday).Kansas City Mfg Index 11 AM. 10-Year TIPS Auction 1 PM. Earnings: AMGN, BAX, BMY, CSH, CELG, CRUS, CY, FCS, GMT, JNPR, KEY, KLAC, KCG, LMT, LUV, MKC, MSFT, OSIS, MMM, RYN, RTN, SWK, SBUX, T, TDY, TPX, UNP, VRSN, GWW, XRX.

·         Friday, 1/25/13: New Home Sales 10 AM. Sectetary Geithner steps down ending his four-year stint. A full moon occurs tomorrow; markets are typically buoyant moving into the full moon. Earnings: COV, CPHD, HAL, HON, IMGN, KMB, OSK, PG, WY.

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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. Jobless Claims and Personal Income and Outlays 8:30 AM.

·         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.

----------------------------  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.