Key Events and Market Movers for Trading the Week of 7/1/13

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: The new month, start of the third quarter, Q3, and start of H2 begins. The July 4^th Independence Day holiday is Thursday with an early market close on Wednesday.  The week favors the bulls since markets tend to be bullish as new money comes into markets for a new month and also ahead of the holiday. Fed heads Dudley and Powell will pump the markets Tuesday afternoon likely creating bullishness. If the markets begin Monday on the weak side, perhaps into Tuesday, the bulls may want to takeover on Tuesday and Wednesday.   ISM will create a market pivot point at 10 AM Monday and Factory Orders will create a pivot at 10 M Tuesday. The U.S. markets are not able to react to the ECB decision this week until Friday morning and will also be hit with Jobless Claims and the Monthly Jobs Report at the same time, so Friday morning should be interesting, especially if volume is on the light side due to traders imbibing in too many beverages on July 4^th.  The Sequestration budget cuts create concern over a second half slowdown this year. The Debt Ceiling limit and CR (Continuing Resolution to fund the government) deadlines occur in September. Politicians must solve the U.S. fiscal mess within the next 11 weeks, reminiscent of 2011, which did not end so well. The Whitehouse scandals are distracting politicians from addressing the fiscal mess. Traders are not concerned since the politicians will always kick the can down the road but any stumble would impact markets negatively. Congress is in recess for the holiday which is a positive for markets. The European debt crisis continues despite the recent calm caused by BOJ easy money buying stocks and bonds. Cyprus is bankrupt, Greece will need additional funding by the end of July, Spain and Italy remain challenged and France’s debt-to-GDP ratio is particularly worrisome. The ECB’s OMT bond-buying program, not fully accessed as yet, creates faux stability. Merkel (Germany) 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 Thursday, 7/4/13.  Draghi leaves rates unchanged 6/6/13 after a one-quarter point cut to 0.5% on 5/2/13. The euro was moving higher due to the weaker dollar but once the Fed tapering news hit last week, the dollar is moving higher sending the euro lower.  A lower euro is needed to help the European manufacturing, export and automobile sectors.  Europe must also compete with the race to debase (currency wars) ongoing around the world.  The China hard versus soft landing saga continues. China barely averted a Lehman-type banking crisis event last week.  China stepped in to add liquidity which created the uplift in equity markets. A China banking crisis may be on tap moving forward and the negative ramifications on global markets would be very dramatic. Copper and commodities have tumbled lower since February. Dr. Copper is a valuable market indicator but the Fed and BOJ central banker policies are distorting markets and masking price discovery. Europe is imposing tariffs on China’s solar panels which results in a retaliation by China slapping tariff’s on European (French) wine. The ‘protectionism’ wars begin. The equity markets continue to ignore the geopolitical landscape. Syria is out of control with 100,000 dead from the bloody civil war. There are 4 million Syrian refugees and 10% of the people now in Jordan, over 500K, are Syrian refugees. Countries bordering Syria cannot support this influx of people causing destabilization across the Middle East. Russia is supporting Asaad with the U.S. now supporting the rebels, many of which are terrorists. The Turkey protests continue with the government now beating citizens and throwing tear gas canisters into buildings to break up any crowds.  Turkey and Syria unrest is causing a slight premium in oil prices with oil printing near one-year highs. Protests are growing in Egypt against Mursi and an American is killed that was taking pictures of the social unrest. The Middle East and northern Africa regions are a mess. Brazil protests continue as citizens complain over the spending on stadiums while hospitals, schools and infrastructure are ignored. The Pope is scheduled to visit Brazil within the month. Geopolitical risk is not properly priced into the markets.  Q1 earnings season is history and the Q2 confessional season is well underway with many companies lowering the bar so it is easier to step over when they release earnings. AA will kick off the earnings season next Monday after the closing bell. The theme of companies meeting EPS but missing on top line revenue continues.  The Fed and BOJ easy money created asset bubbles in dividend stocks, healthcare, staples, utilities, telecoms, REIT’s, MLP’s, high-yield instruments, home builders and blue chips in general. The interest rate sensitive sectors such as utilities, REIT’s, homebuilders and telecom are sold off as Treasury yields sneak higher. Volatility is higher and creates the large intraday and day-to-day point swings in the broad indexes. Expect more of this action. Broad market topping and roll over action is anticipated moving forward.  Keybot the Quant trading algorithm is bullish and tracking UTIL 480.82, RTH 51.48 and XLF 19.20; all three sectors are creating market bullishness. The market bears need to push one of these three parameters bearish to initiate downside market action again. On the seasonality beat, the start of a new month is typically bullish due to new money entering the market. Markets are typically bullish into a holiday. On the esoteric side, Keystone’s Eclipse Indicator targeted the 6/10/13 area, give or take one to three weeks, as having potential for an important top and sell off. The markets topped in late May unless the bulls run higher to reverse the current downside trend of lower lows and lower highs.  A major Bradley turn date occurred on 6/22/13, so a window is now closing which should identify a market trend change. The markets drop into the turn date, then move up after the turn date, so the jury is out as to which direction is preferred moving forward; a few more days will need to play out. Solar flare activity is increasing and may affect electronics, communications and markets as the year moves along. Epic market and economic history is likely on tap from here forward and the action over the last month has not disappointed so far.

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·         Monday, 7/1/13: China and Asia PMI’s. Japan Tankan Survey. Europe PMI’s.  Construction Spending and ISM Mfg Index 10 AM—market pivot point. New money tends to enter the markets and create buoyancy from the last day of the month into the first four days of the new month.  Today begins a new month, the new quarter Q3, and second half H2. Earnings: CSUN, XRTX.

·         Tuesday, 7/2/13: Motor Vehicle Sales. Factory Orders 10 AM—market pivot point. Fed’s Dudley speaks 12:30 PM. Fed’s Powell speaks 5:45 PM. Both Fed heads will pump the dovish QE talk and try to rally equities. Earnings: GBX, STZ.

·         Wednesday, 7/3/13: Eurozone retail sales. Mortgage Applications 7 AM. Challenger Job Report 7:30 AM. ADP Jobs Report 8:15 AM—losing credibility as an indicator. International Trade 8:30 AM. ISM Non-Mfg Index 10 AM.. Oil Inventories 10:30 AM. Natty Gas Inventories 12:00 PM. Markets tend to be bullish in front of a holiday. Markets close early at 1 PM EST for the holiday.

·         Thursday, 7/4/13: BOE rate decision. ECB Rate Decision 7:30 AM EST and Draghi Press Conference 8:30 AM. U.S. markets are closed in Observance of July 4^th Independence Day.

·         Friday, 7/5/13:  Jobless Claims and Monthly Jobs Report 8:30 AM.

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·         In September:  The Debt Ceiling Limit and CR Continuing Resolution to fund the U.S. government deadlines occur.  Politicians must develop solutions over the summer time reminiscent of 2011 which did not end well. The Whitehouse scandals are distracting politicians from addressing the fiscal problems.

·         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 but bears will be happy if Yellen is not selected.

·         Friday, 2/7/14:  Winter Olympics begin in Sochi, Russia, through 2/232/14. Watch $RTSI and RSX.

·         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.