Keystone's Key Events and Market Movers for Trading the Week of 1/28/13

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: A large economic data dump is on tap this week as well as a continuation of earnings season. Consumer Confidence on Tuesday, the FOMC decision Wednesday afternoon, the Monthly Jobs Report Friday morning, and then Consumer Sentiment are the four key releases. The next political deadline is the Sequestration on 3/1/13, only 32 days away, followed by the Continuing Resolution on 3/27/13, then the Debt Ceiling limit comes into play again mid-May. Traders are no longer concerned of any market downside occurring due to these political deadlines. The politicians solved the Fiscal Cliff and the Debt Ceiling deadlines with can-kicking and this will simply continue on indefinitely, so there is no reason to price in any market downside.  Of course, if a stumble occurs, it would impact markets more greatly due to this complacency. The European debt crisis news directly dictates global market direction and all is quiet across the pond for the last couple months encouraging market bulls.  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 wants Greece to stay in the euro until her election in September then will not care afterwards. The next ECB Rate Decision and Press Conference is 2/7/13.  A cut is expected in early 2013, however, Draghi gave the impression a rate cut is nowhere near so perhaps summer time may be the target. In addition, Draghi is now talking up the euro saying it had a rebirth in 2012. Euro is above 1.34, up euro means up markets. If the European economy continues to falter, however, and the automobile sales are dropping significantly, Draghi will change his tune quickly.  Europe must cut rates to weaken the euro and help the Eurozone grow out of the debt mess but so far this concept is on a milk carton. 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. CAT earnings, the number one key proxy for China, hit on Monday morning and this can very well be the most important event of the entire week. Copper and commodities will immediately react and send equities in the same direction. The equity markets continue to ignore the geopolitical landscape. Egypt is erupting in chaos again with over thirty deaths this weekend.  Use Brent oil as a proxy for the Middle East turmoil. If Brent is above 110, now at 112-113, tensions are rising. Calm is returning under 110.  A weak global economy is a force to drive oil price lower but Middle East turmoil wants to take oil prices higher. Syria remains a mess with tens of thousands of people dead. The Northern Africa to Middle East area is a powder keg. WTIC oil remains on the verge of breaking out to the upside at 96-ish. As oil goes, so goes the markets. The earnings season continues. Companies are meeting lowered estimates although the percentage beats are on the low side. Top line revenues continue to be challenged. AAPL choked last week but the markets made new highs. As AAPL goes, so goes Nasdq but not necessarily the SPX.  A few more weeks will be required before writing off Apple’s impact. The money running from AAPL went into high short interest stocks that launched dramatic short squeezes that actually bounced the broader markets higher. The expectation is that Apple weakness would be in concert with a weaker economy but for now, the wine is flowing like water in the markets. Tech (COMPQ) lagged the broad markets last due to AAPL and small caps (RUT) did not show the strong leadership from the week before. The small caps are enjoying a nice run which is also expected seasonality-wise. CAT earnings are key as mentioned above. Also of interest are YHOO, LLY, F, PFE, BA, FB, MO, MA, UPS, MRK and XOM.  Tech, pharma, shipping, auto’s and oil will provide a cross section of the economy, CAT and UPS are the two most important. Volatility is now at a six-year low but the VIX shows signs of recovery.  The CPC put/call remains low verifying the market complacency.  Traders never doubted the positive outcome for the fiscal cliff, and now the debt ceiling limit, and are without fear or worry.  A Bradley turn last weekend resulted in a melt-up move.  The market bears are absent this year thus far. The markets were buoyant late last week into the full moon. January typically finishes with weakness the last couple days.  January ends on Thursday, EOM.  The ole Wall Street adage says as the first day in January goes the first week goes, as the first week went so goes the month, and as January goes so goes the year. Something else for the bulls to raise their glasses to and keep the party going. There is upside momo in the markets with the orgy move to start the year. Market topping action and roll over is anticipated as the days and weeks play out.

·         Monday, 1/28/12: Durable Goods Orders 8:30 AM. Dallas Fed Mfg Survey and Pending Home Sales 10 AM.  Earnings: BIIB, CAT-China proxy, CE, CR, FBP, HAYN, IRF, MCHP, OLN, PCL, SANM, STX, STLD, UNB, YHOO.

·         Tuesday, 1/29/13: FOMC Meeting begins. Consumer Confidence 10 AM—market pivot point.  5-Year Note Auction 5 PM. Earnings: AKS-steel, BXP, BSX, BRCM-tech, DHI-housing, DHR, LLY, EMC, F, FSL, HOG-discretionary spending, HRS, HW, IDXX, IP-paper, JBLU, LXK, EDU, NUE-steel, BTU-coal, PNR, PFE, RHI, RYL, TYC, X-steel, VLO, VRTX, VRTS, WBSN.

·         Wednesday, 1/30/13: Mortgage Applications 7 AM.  GDP 8:30 AM. Oil Inventories 10:30 AM.  7-Year Note Auction 1 PM. FOMC Rate Decision 2:15 PM—market pivot point. The last two days of January tend to be bearish. Earnings: ALGN, AMP, BA, CBT, ELY, CTXS, CVLT, COP, CLB, EA, FB, FIO, HES, JDSU, LLL, MAN, MUR, NOC, NXPI-tech, OI, PSX, QTM, ROK, SWKS, SO, TSCO.

·         Thursday, 1/31/13:  EOM. Challenger Job Report 7:30 AM. Employment Cost Index, Jobless Claims and Personal Income and Outlays 8:30 AM.  Chicago PMI 9:45 AM. Natty Gas Inventories 10:30 AM. Farm Prices 3 PM-watch commodities. Earnings: AN, APU, BEBE, BERY, BX, CRR, D-utes, DOW-chemicals, DNKN, EMN-chemicals, EPD, HP, FLWS, KEM, MO, MTW, MA, MCK, OXY, PCAR, RGLD, TLAB, UA, UPS-shipping, VIAB, WHR, XEL, ZMH.

·         Friday, 2/1/13: Monthly Jobs Report 8:30 AM. PMI Index 8:58 AM. Consumer Sentiment 9:55 AM—market pivot point.  Construction Spending and ISM Mfg Index 10 AM. Earnings: AON, CVX, XOM, IR, LVS, LYB-chemicals, MAT, MRK-pharma, MOD, NOV, TDW, TSN.

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·         Monday, 2/4/13: Factory Orders 10 AM.

·         Tuesday, 2/5/13: ISM Non-Mfg Index 10 AM.

·         Thursday, 2/7/13: Jobless Claims and Productivity and Costs 8:30 AM.

·         Friday, 2/8/13: International Trade 8:30 AM. Wholesale Trade 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.

·         Wednesday, 2/13/13: Retail Sales 8:30 AM.

·         Friday, 2/15/13: Consumer Sentiment 9:55 AM.

·         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 (CR) 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?

·         Sunday, 5/19/13:  16.4 trillion Debt Ceiling limit is hit.

·         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.