Key Dates and Times for the Week Ahead:
· Keystone’s Comments on the Upcoming Week: Today is Cinco de Mayo that celebrates Mexican heritage. Today is also the Eastern Orthodox Easter. A great day is hoped for all. There is very little economic data on tap this week and mostly second and third tier earnings reports. Therefore, the markets may turn to Europe and global news events, such as the increasing Middle East turmoil, to seek direction. Fed heads are on tap with Chairman Bernanke speaking Friday morning. All eyes will be watching the Dow Industrials to see if a close above 15K occurs, or not. The Sequestration remains in play creating concern over a second half slowdown this year, however, the Friday jobs report says don’t worry, be happy. The Debt Ceiling limit is now on track to hit at the end of May, however, Congress is developing a plan to push the Debt Ceiling deadline to August or September. This action would place the deadline in the same time frame as the CR (Continuing Resolution to fund the government) deadline in September. This scheduling allows the politicians to sort out a fiscal path for America between May and August, reminiscent of summer 2011, which did not have such a happy ending. Traders remain complacent since the politicians will always kick the can down the road, just like they are doing with the debt ceiling limit right now. Of course, if a stumble occurs, it would impact markets severely because of this ongoing complacency. Congress is retruning from a one-week break which is a negative for markets. The European debt crisis continues with headaches in Cyprus, Greece, Portugal, Slovenia and Italy. Cyprus needs more money. The Italy election saga continues. Slovenia may need a bailout. Portugal appears shaky. Greece remains troubled. Spain will not task for a bailout since bond yields remain tame. The ECB’s OMT bond-buying program is in place and not even fully accessed as yet. The BOJ easy money is creating the drop in European bonds, perhaps a faux calm? Merkel does not want any nation to exit the euro before her re-election in September but will not care afterwards. The next ECB Rate Decision and Press Conference is 6/6/13. Draghi lowers rates one-quarter point to 0.5% on 5/2/13 to help the European manufacturing, export and automobile sectors, and compete with the currency race to debase ongoing around the world. The euro should move lower which should move U.S. equities lower. The China hard versus soft landing saga continues. Copper and commodities have tumbled lower for two months but surprisingly have not created equity market weakness. Commodities, especially oil and copper, bounced back strongly last week. The China manufacturing data is weak so the dramatic bounce-back in commodities will be tested this week against a slowing global economy. The Fed and BOJ money printing is creating the bullish stock market obviously over-ridding the negative effects of lower commodities. The BOJ is likely the single most important influence on markets right now; weaker yen = higher dollar/yen = higher equities while stronger yen = weaker dollar/yen = weaker equities. Use the dollar/yen 99 level as a pivot; bulls are happy above 99 while bears are happy below 99. The equity markets continue to ignore the geopolitical landscape. Syria is out of control with over 70,000 now dead from this bloody civil war. Israeli airstrikes occur over this weekend stopping the flow of missiles from Iran to Hezbollah (Lebanese guerillas), increasing Middle East turmoil and Israel-Iran tensions. Syria refugee’s flood into Jordan and other neighboring countries that are unable to handle the huge influx of people. Egypt is in chaos. North Korea theatrics keep popping up from time to time. Markets do not have any geopolitical or other serious risk priced into the markets right now. Q1 earnings season continues. The theme of companies coming in light on top line revenue continues, even after the bar is lowered. A strong economy should show ever increasing revenue numbers, not flat to lower sales. Companies are booking profits by squeezing every last drop of blood from existing employees rather than growing sales. The earnings this week highlight the shipping, water and natty gas sectors. The Mouse House, DIS, will receive special attention. The tech (COMPQ) and small caps (RUT) show some leadership last week which has been lacking recently. Traders and investors use the Fed and BOJ easy money to pump the dividend stock bubbles in healthcare, staples, utilities, telecoms, REIT’s, high-yield instruments home builders and blue chips in general. Last week shows that a potential rotation may occur from these bubble sectors into tech/IT, industrials and materials. With all the current weakness in commodities, albeit a big recovery in copper and oil late last week, the move to materials and industrials is questionable. XLI and XLB weekly charts are negatively diverged providing nothing attractive from a long perspective; they are set up better as short plays moving forward. The utilities, UTIL, chart went parabolic (behavior expected in commodities not in utilities) over the last few weeks and experienced weakness last week. The Fed and BOJ easy money is creating the new dividend asset bubbles. Aunt Betty and Uncle George, that are taking their entire life savings and chasing into dividend stocks that they think are safe, are going to get crushed as the weeks play out. The low volatility provides bullish rocket fuel for equities. VIX 14 remains a key pivot for the week ahead; bulls win with VIX under 14 and bears win above VIX 14. Continued broad market topping and roll over action is anticipated moving forward. The NYMO chart continues to signal a significant market top. The SPXA150R shows that over 90% of stocks are bullish, an ideal time to comfortably short the market moving forward. Keybot the Quant trading algorithm remains long. The month of April is another up month with the one-half year equity rally forging ahead. On the esoteric side, an M-class solar flare occurred on Friday. The M class flares are not particularly strong so there was no significant radio or other transmission problems. The solar flare may indicate that the peak in the 11-year solar cycle, this year, may be ramping up. Solar flares not only wreak havoc on electronics but also on the human psyche. Interestingly, the August 2011 waterfall crash occurred in conjunction with a significant solar flare event. The new moon and eclipse occurs this week on Thursday and Friday. Markets are typically weak moving through the new moon (reference the Other Market Signals page for further study). The next Bradley turn is a major turn on 6/22/13 (Bradley turns do not forecast direction only that a major trend change or melt-up, or melt-down, in markets may occur). Keystone’s Eclipse Indicator targets this period through June as having potential for a significant market selloff. The 4/10/13, and 6/10/13 dates, allowing +/- 2 weeks before and after these dates, are the key windows targeted for a major market pullback. Interestingly, the 4/10/13 date, forecasted months in advance by Keystone, identified the exact market top in April. A major market sell off can occur at anytime forward but the window between 5/27/13 and 6/24/13 is particularly important. May and June is set up as an epic period for markets and economic history. Do not forget dear ole Mom in the days ahead. Mother’s Day is Friday in Mexico and Sunday in the States and Canada.
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· Monday, 5/6/13: China PMI Composite. Flash Crash 3-Year Anniversary. On-line sales tax decision will affect Internet companies. Earnings: ALNY, APC, CCC, CECO, CUTR, DDS, EBIX, ECTE, ENOC, ENV, ENZN, FRP, FSLR, FST, GLRE, HOLX, KERX, MELI, MR, PER, PETS, PGNX, SDT, SMG, SIGA, TELK, TSN, USU, VNO.
· Tuesday, 5/7/13: Japan PMI Composite. 3-Year Note Auction 1 PM. Consumer Credit 3 PM. Earnings: ACAD, AWK, BCRX, BMC, CRZO, CKP, CNK, COKE, CDXS, CVLT, DIS, EA, FE, FOSL, FTEK, HCN, HFC, HPT, IAG, INFI, ISIS, JAZZ, JVS, KS, KWK, LPX, MAKO, MCK, MITK, MRO, MYGN, NRG, OAK, OMX, ONXX, OSIR, SGA, SD, SYNC, TRIP, URS, VCLK, WMB, Z.
· Wednesday, 5/8/13: Mortgage Applications 7 AM. BAC shareholder meeting. Fed’s Stein speaks 9:30 AM. Oil Inventories 10:30 AM. 10-Year Note Auction 1 PM. Markets are typically weak moving through the new moon. Earnings: ATVI, ALJ, ATRS, AOL, CECE, CHDX, CLNE, CTSH, CTRP, DCTH, DK, EMMS, ETP, EXM-shipping, FSYS, GMCR, GPRN, HALO, HNSN, HEK, IMMU, JOE, LORL, MFB, MWE, MTRX, MDR, MED, MYRG, OSUR, OREX, OVRL, PEIX, PCRX, PVA, PPO, RAX, RIG, QTM, SODA, SFUN, TSLA, ULTR, VVUS.
· Thursday, 5/9/13: BOE policy announcement. Fed’s Lacker speaks 8 AM. Jobless Claims 8:30 AM. Wholesale Trade 10 AM-market pivot may occur. Natty Gas Inventories 10:30 AM. 30-Year Bond Auction 1 PM. Fed’s Plosser speaks 1:15 PM. New moon and eclipse. Earnings: APA, BEBE, CFN, CDR, CDE, CTB-rubber, CYTX, DAR, DF, DNDN, FCN, GXP, HSC, MDRX, PANL, PCLN, RTK, RNF, RICK, SJT, VRS.
· Friday, 5/10/13: Chairman Bernanke speaks 9:30 AM. Fed’s Evans speaks. Fed’s George speaks 2 PM. Treasury Budget 2 PM. G8 Meeting begins in the U.K. Earnings: AWR, ATRI, CWCO, EGLE-shipping, EVEP, HL, HOGS, LXRX, URRE, XIN.
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· Monday, 5/13/13: Retail Sales 8:30 AM. Business Inventories 10 AM. Earnings:
· Tuesday, 5/14/13: Earnings:
· Wednesday, 5/15/13: Mortgage Applications 7 AM. Empire State Mfg Survey and PPI 8:30 AM. Oil Inventories 10:30 AM. Earnings:
· Thursday, 5/16/13: Jobless Claims, CPI and Housing Starts 8:30 AM. Philly Fed 10 AM. Natty Gas Inventories 10:30 AM. Earnings:
· Friday, 5/17/13: Consumer Sentiment 9:55 AM. Leading Indicators 10 AM. Earnings:
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· Monday, 5/20/13: Earnings:
· Tuesday, 5/21/13: Earnings:
· Wednesday, 5/22/13: Mortgage Applications 7 AM. Existing Home Sales 10 AM. Oil Inventories 10:30 AM. FOMC Minutes 2 PM. Earnings:
· Thursday, 5/23/13: Jobless Claims 8:30 AM. New Home Sales 10 AM. Natty Gas Inventories 10:30 AM. Earnings:
· Friday, 5/24/13: Durable Goods Orders 8:30 AM. Earnings:
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· Monday, 5/27/13: U.S. Markets are Closed in Observance of Memorial Day.
· Tuesday, 5/28/13: U.S. Markets Reopen for trading. Consumer Confidence 10 AM. 2-Year Note Auction 1 PM. The 16.4 trillion Debt Ceiling Limit is hit, however, the government is developing a plan to extend the Debt Ceiling deadline to August or September. This action will place the deadline near the CR resolution deadline to fund the government which allows Congress to provide a fiscal path of clarity this spring and summer. Earnings:
· Wednesday, 5/29/13: Mortgage Applications 7 AM. Oil Inventories 10:30 AM. 5-Year Note Auction 1 PM. Earnings:
· Thursday, 5/30/13: Jobless Claims and GDP 8:30 AM. Natty Gas Inventories 10:30 AM. 7-Year Note Auction 1 PM. Earnings:
· Friday, 5/31/13: EOM. Personal Income and Spending 8:30 AM. Chicago PMI 9:45 AM. Consumer Sentiment 9:55 AM. Farm Prices 3 PM. Earnings:
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· In September: Merkel (Germany) seeks re-election and will not want Greece or other nations to exit the euro before the election, but will not care afterwards. Perhaps Greece or other nations, and/or Germany will 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. Will Yellen, even more dovish and likely wanting to see QE on steroids, take the reins? Equity bulls will be happy if Yellen receives the nod (money-printing will pump the markets higher) but bears will be happy if Yellen is not selected.
· 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.
The ongoing rally (and maybe the US/world economy) is held together by QE inflow, either from the ECB, BOJ, China or FED. Monetary flow is the key to the market moving upward at this point. When the flow stops, the market drops and maybe the economy. Not sure the US economy is self sustaining at this point and Europe is certainly not. When the BOJ inflow stops, the market may not have enough total inflow from the FED to keep the rally going. As you said, the world QE inflow is also keeping European Bond interest rates low enough for the ECB not to act. I think the ECB will be forced to act (OMT) when the BOJ stops easing and it will certainly be forced to act when the FED stops easing. I think that EU's checkbook is quite limited though. It is also possible that the FED will increase the rate of QE and that will keep the rally going and Europe alive.
ReplyDeleteThe market reaction to the end of world wide QE will depend on the market height. However, when QE stops completely, the end of the European Union will be close at hand. At that point, short the euro. Collective central bank action will be required to wean the world off QE in a controlled manner to prevent significant market/economic fall.
Personally, I think the FED's QE efforts are really focused on saving the US banking system. Inflation is the only way for US (and maybe the worldwide) banking system to get the bad loans off the books without significant and possibly catastrophic write downs. Any significant deflation would be catastrophic to the US and European banking system. I believe there is a collective worldwide central bank effort to prevent deflation. Germany maybe the lynchpin of this effort. Without Germany in the EU, the EU collapses. Without the EU there is no ECB to backstop Spain, Italy and France. A default by these countries could plunge the worldwide banking system into chaos (do to derivatives) before deflation solve the US banking bad loan problem.
That is a key thought about the ECB because they may very well find a way to extend the market upside a bit longer. All your comments are well thought out Rich. Chairman Bernanke is labeled as the scholar on the Great Depression and he has felt for years that the mistake made back then was not initiating QE fast enough and strong enough at the start of the crisis. Japan is another example of this deflationary spiral action as they remain in a deflationary funk for a lost two decades. Keystone says phooey on all that. Bernanke did create a strong stock market over the last four years but the other positive effects that should follow along, due to the wealth effect, the theory behind using QE, are not occurring.
DeleteKeystone has a simple mind so he views things simply. The 1990's and 2000's were a huge leveraging event, everyone walked around with their chests puffed out, new houses, new cars, you could have anything as long as you could fog a mirror to receive a loan. Very simply, there is a massive deleveraging still required across individuals, companies and government. The companies are furthest along and many are in good shape but they have no sales since the individuals and especially government requires far more deleveraging moving ahead. The deleveraging will likely overpower the Fed and other central bankers over time and the sad thing is that they created more debt and the globe would have been better off if everyone took their medicine in 2008-2010. It would all be over now and we would have solidly strong markets, since capitalism would have been saved rather than abolished, and the wash-out would have provided a strong base to build a great future. Instead, we have bloated equity markets with new asset bubbles ready to pop, especially divvy stocks, also now deeper in debt, a very sick anemic global economy, and young people deep in debt with no job prospects. There is likely some deflation that will occur over the next year or two or longer and Treasury rates will likely move sideways for a year or few. The secular bear market should be in play 2000-2018.
''Today is also the Eastern Orthodox Easter. A great day is hoped for all. ''
ReplyDelete:) nice of you to notice :)
Thank you,
V. :)
Keystone: Your comment about NYMO signaling a market top is confusing - could you expand?
ReplyDeleteFrom Decision Point on Friday, it appears that almost every sector (save defensive issues) have put in higher McO highs for this sequence; some have just put in 2013 higher highs, and volume McO's are leading or matching breadth in every single risk on sector - See XLE, XLI, SP600 as typical.
How is that "topping"?