Keystone's Key Events and Market Movers for Trading the Week of 2/4/13

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: Economic data is lean this week but markets may see stutter steps at 10 AM on Monday, Tuesday and Friday.  Earnings season is in full swing. Considering the wild currency moves recently and especially last Friday morning, the ECB Rate Decision and Press Conference is the most important event this week which occurs before U.S. markets open on Thursday morning. Draghi wheels power this week, he will either strengthen or weaken the euro on his words and all currency, futures and equity markets will respond immediately.  The next political deadline is the Sequestration on 3/1/13, only 24 days away, followed by the Continuing Resolution on 3/27/13, only 51 days away, 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 moving forward.  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.  In all the market euphoria, no one noticed the Spain banks crumbling last week (after the short-sale ban was lifted) and the Spain market losing 5%. 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 should continue although the chase for yield is causing with traders placing risky bets on these troubled nations. 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 Thursday, 2/7/13.  Draghi did not hint at a rate cut a month ago so the euro keeps floating higher. The U.S. and Japan cannot destroy their currencies fast enough so Europe is standing by watching losing business that they cannot afford to lose.  Thursday will be dramatic.  Euro is at 1.36-1.38; up euro means up markets. If the European economy continues to falter, however, and the automobile sales are dropping significantly, Draghi will have to cut to weaken the euro and help the Eurozone grow out of the debt mess. 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 talks a hesitant story but pumps in the background. They correctly worry about the new 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 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 and the income figures show that the rural Chinese are making more money than the urban dwellers. No wonder that many question the validity of the China data. CAT, a key China bellwether, was unenthusiastic last week.  YUM is another key barometer, due to KFC and the love for chicken in Asia, so the YUM earnings on Monday will speak volumes about the health of the Chinese economy.  The equity markets continue to ignore the geopolitical landscape. Egypt is erupting in chaos with thousands of protestors storming Morsi’s palace.  Of more importance to the oil markets is the Turkey Ebassy bombing since key pipelines move oil to and from Europe and the Middle East through Turkey.   Use Brent oil as a proxy for the Middle East turmoil. If Brent is above 112, now well above, it signals that tensions are rising. Calm is returning under 112.  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 slightly under the typical 70 to 75% expected. Top line revenues continue to be challenged. AAPL choked last week but the markets made new highs. As AAPL goes, so goes the Nasdq but not necessarily the SPX.  It will be interesting to see if Apple moves up as the markets move down. 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 helped propel the broader markets higher. The expectation is that Apple weakness would be in concert with a weaker economy with everything going down, but, for now, AAPL is a somewhat isolated event. Tech (COMPQ) and small caps (RUT) did not show strong leadership last week which would be expected for a strong rally. The small caps are enjoying a nice run which is also expected seasonality-wise. YUM earnings are key as mentioned above. Also of interest are DIS, PM and S.  Luxury retailer RL tells us if the wealthy are spending dough.  Oil and TSO oil refiner will shake up the oil markets. Healthcare stocks also on tap. AXL is important on Friday since every vehicle needs an axle. YRCW provides insight into the strength of trucking and shipping now, or lack thereof.  Volatility remain at a six-year low but the VIX shows signs of recovery moving up over 14 last week before dropping for another test of the lows.  The CPC put/call remains low verifying the market complacency.  Traders never doubted the positive outcome for the fiscal cliff and debt ceiling limit and those beliefs are now reinforced creating complacency.  A Bradley turn date on 1/20/13 resulting in the market melt-up move. This turn date is followed by a major Bradley turn date on 1/29/13 last week.  The markets remain in this window for a large market turn to occur early this week.  Staying on the esoteric side, a new moon occurs next Sunday, 2/10/13, so markets would be expected to be weak from the Thursday close through the Monday close (Keystone added the Full Moon and New Moon Indicators to the Other Signals page on this site so that can be referenced for further study).  The market bears are absent this year thus far. There is upside momo in the markets currently but topping action and roll over is anticipated as the days and weeks play out.

·         Monday, 2/4/12: Factory Orders 10 AM—watch for a market stutter step. The Bradley window remains open Monday and Tuesday for a major market turn to occur. Earnings: APKT, APC, BIDU, CLX, CXW, GCI, GILD, GRC, HUM, LMNX, MLM, NANO, MOBI, SOHU, SYY, TARO, UNB, VECO, YUM-key China barometer.

·         Tuesday, 2/5/13: ISM Non-Mfg Index 10 AM—watch for a market stutter step. Earnings: AFL, AGN, ATK, AEP, ADM, ADP-payrolls, BDX, CAH, CERN, CMG, CYTK, DIS, DO, ETN, EMKR, EMR, EL, EXPE, FISV, GNW, GLUU, HBI, HCA, LFUS, MYGN, PNRA, SIRI, SE, SEP, TE, HAIN, THOR, TRMB, VSH, ZNGA .

·         Wednesday, 2/6/13: Mortgage Applications 7 AM—is the trend up or flat? Treasury Refunding Announcement 9 AM.  Oil Inventories 10:30 AM.  Earnings: CNW, CVH, CMI, CVS, DV, EXM, FMC, GSK, GMCR, GRA, HPOL, IACI, IRBT, MRO, MPWR, NTES, NUS, OSUR, PRU, RL, TSO, TWX, USG, V, VSAT, YELP.

·         Thursday, 2/7/13:  BOE Rate Decision 7:00 AM EST. ECB Rate Decision 7:45 AM EST and Press Conference 8:30 AM. Jobless Claims and Productivity and Costs 8:30 AM.  Natty Gas Inventories 10:30 AM—watch the HFT (high-frequency trading) robots for shenanigans. Consumer Credit 3 PM—is the consumer spending? Earnings: AAP, ALNY, ATHN, BG, CI, CCE, CTSH, CSTR, EXC, FLIR, IT, GPRE, HAS, LAZ, LNKD, MPW, MCHP, MOH, MWW, NCR, NYT, NUAN, ONNN, OPEN, PACR, PTEN, PM, SBH, S, HOT, SPWR, SNCR, TEVA, TSRA, TDC.

·         Friday, 2/8/13: China CPI before the week-long New Year's celebration. International Trade 8:30 AM. Wholesale Trade 10 AM—watch watch for a market stutter step. A new moon occurs Sunday so markets would tend to be bearish from the Thursday (yesterday) close thru the Monday close. Earnings: AXL, AOL, APO, ETM, ETR, GSM, ITMN, LH, LPX, MCO, SFUN, TCP, VICL, YRCW.

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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.
·         Sunday, 2/17/13: Cyprus elections.
·         Monday, 2/18/13: U.S. Markets Closed in Observance of President's Day.
·         Tuesday, 2/19/13: U.S. Markets Open for Trading.

·         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.