Keystone's Key Events and Market Movers for Trading the Week of 4/8/13

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: Today is Holocaust Remembrance Day.  Europe is on the front burner this week with the ongoing Italy saga as well as concerns over Cyprus, Slovenia and Portugal.  Alcoa kicks off the Q1 earnings season after the bell on Monday.  FOMC Minutes are key on Wednesday afternoon, then Jobless Claims Thursday morning. The week ends theatrically with JPM and WFC earnings, PPI, Retail Sales, Consumer Sentiment and Business Inventories on Friday. The Sequestration will bite moving forward.  The Debt Ceiling limit is mid-May, only one short month away. The Continuing Resolution (CR) to fund the government will need approved in September. Traders are no longer worried or concerned of any market downside since politicians always kick the can. Of course, if a stumble occurs, it would impact markets severely because of this ongoing complacency. Congress returns from recess this week which is a market negative. The European debt crisis drama continues with Italy and Cyprus dominating the news flow.  Italy needs to either form a government or announce new elections. The equity markets will sell off on uncertainty in Italy. Watch the Italy, Spain, Portugal and Greece 10-year yields to see if they blow out to the upside signaling trouble, or not.  As the euro goes, so goes the equity markets but this asset relationship is skewed over the last month with the euro dropping but equity markets rising. Last week the relationship started to move in sync again. Slovenia and Portugal are in the spotlight this week as their debt rises. 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 in recent months.  Spain and other nations are reluctant to give up sovereignty and accept conditionality as terms of a bailout package. 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. Merkel wants Greece to stay in the euro until her re-election in September but will not care afterwards. The next ECB Rate Decision and Press Conference is Thursday, 5/2/13.  Draghi is walking a tightrope as the European manufacturing, export and automobile sectors weaken in large part due to the U.S. and Japan debasing their currencies. Draghi will have to capitulate by lowering rates to stimulate the economy and help Europe grow out of the debt mess, which will send the euro lower.  China inflation data is released overnight Sunday evening and will affect the S&P futures.  The China hard versus soft landing saga continues. As copper and commodities go, so goes the markets, but the equities markets move higher over the last month as oil, copper and commodities collapsed, verifying that the move up in equities is purely Fed-driven. The copper-equities relationship has broken down (Dr. Copper leads the markets) but should reestablish itself moving forward.  China correctly worries about the new commodities inflation and asset bubbles that will be created by their easy money policies (Chairman Bernanke incorrectly defends QE saying it does not create asset bubbles, even as the current dividend, blue chip, utilities (now parabolic), healthcare, REIT’s, home-building and high-yield corporate perceived safe haven bubbles grow). New leaders President Xi Jinping and Premier Li Keqiang are targeting a 7.5% growth rate for 2013. The China data continues to forecast blue skies ahead but how is this possible when their number one customer, Europe, is in recession and depression, the U.S. is flat, and uninhabited cities litter the China countryside.  The urban shift to a domestic-led economy is occurring far more slowly than anticipated and the new housing is too expensive for folks moving to the cities.  China demographics are a mess due to the multi-decade one-child policy now causing a lack of workers to fuel economic health.  Income figures show that the rural Chinese are making more money than the urban dwellers providing no incentive to move to the cities.  Retail sales are lagging and manufacturing data shows a standstill. CAT, YUM, FDX and DE, three key China bellwethers, are lowering guidance moving forward.  Commodity currencies such as Australia and Canada are weakening due to China and Asia weakness. The equity markets continue to ignore the geopolitical landscape. Syria is out of control with refugee’s now threatening collapse of neighboring nations and chemical weapons may have been used. Egypt remains in chaos creating trouble along the Suez Canal. The Israel-Iran tensions grow.  The North Korea saber-rattling increases daily. Use the Brent oil 112 level as a proxy on the Middle East violence.  WTIC crude oil stumbles sideways in the 90’s on over supply issues and a weakening China economy; the 80’s are likely on tap in line with the deflationary vibe taking hold.  As oil goes, so goes the markets. Q1 earnings season begins this week with the typical AA kickoff on Monday.  Companies have lowered estimates as is typically the case, so even Grandma Edna, in her orthopedic shoes, can easily step over the bar.  In general, top line revenues continue to be challenged and many companies are decreasing dividends. Companies are meeting EPS targets by squeezing every last drop out of each employee. If top line revenues remain flat or lower, companies will have to start cutting jobs, and this is not good for markets in light of the paltry 88K jobs report last Friday.  Tech (COMPQ) and small caps (RUT) are showing leadership to the downside. The collapse in semiconductors is significant last week and went unnoticed by the media. Watch the semi’s closely since a SOX under 425 will create bearish markets moving forward.  The Fed’s easy money, as well as money fleeing Europe, continues to pump the safe haven bubbles in dividend stocks, healthcare, staples, utilities, REIT’s, home builders and blue chips in general. UTIL is now parabolic at 515.  The selling volume is clearly outpacing the buying volume in recent days and distribution is taking place in the broad indexes.  The VIX popped this week but the bulls are managing to keep this beach ball underwater, for now.  If the VIX moves above 14.47, the markets will sell off in force and not look back. Broad market topping and roll over action is anticipated moving forward. Keybot the Quant is short and focused on volatility and semiconductors to begin the week.  Very simply, market bulls win this week if SOX moves above 425. Market bears win if VIX moves above 14.47. On the esoteric side, the new moon occurs on Wednesday and markets are typically bearish moving through the new moon from Tuesday into Thursday. The new moon creates the maximum amount of darkness so this creates additional tension with the North Korea situation. Military operations begin and occur around the new moon to take advantage against an enemy by using infrared and night-vision technology. Also of interest is Keystone's Eclipse Indicator that says 4/10/13, Wednesday, give or take a few days or week or two, has a high potential for a strong market selloff.

·         Monday, 4/8/13:  BOJ Minutes likely reinforcing further stimulus. Germany industrial production. Watch Italy this week.  Fed’s Pianalto speaks. Chairman Bernanke speaks in the evening. Earnings: ADK, AA kicks off earnings season after the bell, STP.

·         Tuesday, 4/9/13: China CPI and PPI inflation numbers and Beige Book. NFIB Small Biz Optimism Index 7:30 AM. Wholesale Trade 10:00 AM-markets may take a stutter step. 3-Year Note Auction 1 PM. Earnings: PBY, ZEP.

·         Wednesday, 4/10/13: Mortgage Applications 7 AM—is the trend up or down? (2/13 down; 2/20 down; 2/27 down; 3/6 up; 3/13 down; 3/20 down, 3/27 up, 4/3 down, 4/10 ?). Oil Inventories 10:30 AM. 10-Year Note Auction 1 PM. FOMC Minutes 2:00 PM—markets will pivot.  President Obama releases a budget already two months late. Treasury Budget 2 PM. New moon-markets are typically weak moving through the new moon. Earnings: APOG, BBBY, KMX, FDO, FAST, JKS, NG, RT, SABA, STZ, TITN.

·         Thursday, 4/11/13: Jobless Claims and Import/Export Prices 8:30 AM Natty Gas Inventories 10:30 AM. 30-Year Bond Auction 1 PM. Earnings: JBHT, PIR, RAD.

·         Friday, 4/12/13: Producer Price Index (PPI) and Retail Sales 8:30 AM. Consumer Sentiment 9:55 AM—markets will pivot at 10 AM. Business Inventories 10 AM. Earnings: CSUN, GIGM, JPM, WFC.

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·         Tuesday, 4/16/13: CPI and Housing Starts 8:30 AM. Industrial Production 9:15 AM.

·         Wednesday, 4/17/13: Beige Book 2 PM—markets will pivot.

·         Thursday, 4/18/13: Jobless Claims 8:30 AM. Philly Fed and Leading Indicators 10 AM.

·         Friday, 4/19/13: OpEx.

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·         Monday, 4/22/13: Existing Home Sales 10 AM.

·         Tuesday, 4/23/13: PMI Mfg Index 9 AM. New Home Sales 10 AM.

·         Wednesday, 4/24/13: Durable Goods Orders 8:30 AM. 5-Year Note Auction.

·         Thursday, 4/25/13: Jobless Claims 8:30 AM. 7-Year note Auction 1 PM. Full moon.

·         Friday, 4/27/13: GDP 8:30 AM. Consumer Sentiment 9:55 AM.

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·         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.

·         In Q4 2013:  European bank stress tests will occur.

----------------------------  2014  ----------------------------------

·         On Friday, 1/31/14: Chairman Bernanke’s term ends at the Fed, unless there is news during Q4 2013 that he will stay on.

·         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.