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Cliff Wachtel
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Cliff Wachtel, CPA, is currently the Director of Market Research, New Media and Training for Caesartrade.com, a fast growing forex and CFD broker. He covers a variety of topics including global market drivers, forex, currency hedged and diversified income investing, and is currently working on a... More
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  • The Coming Week Feb 28-March 4: Calendar Highlights, Themes, Key Market Movers 0 comments
    Feb 27, 2011 2:44 AM | about stocks: UUP, UDN, FXA, FXB, FXC, FXD, FXE, EUO, FXF, FXEN, FXY, JYF, AUNZ, CYB, GLD, CNY, USO, DUG, DBV, ICI, CEW, SLV, OIL, SPY, SDS, RSW, BXDC, SPXU, SH, QQQ, DIA, EWC, EWA, TLT, XHB, ITM, ERO, IGOV, VGK, TBT, GSG, DBC, CORN, ICN, SZR, BZF, GRU, DAX-OLD, FRC, DB, SAN
     PRIOR WEEK

    Libya Unrest – Oil Flies, Market Dies: Last week the only real market mover was the spread of the popular revolt against the ruling dictators to an actual major oil producer, Libya. Oil prices soared, most other risk assets plunged.

    COMING WEEK MARKET DRIVERS

    See Feb. 28 – March 4 Market Movers: The Four Questions

    BIG THEMES BY REGION/COUNTRY: US, UK CENTRAL BANK, ADVANCED GDP KEYASIA

    AUD retail sales, RBA rate statement, GDP q/q, building approvals, trade balance   CNY manufacturing PMI,

    US

    Next week is all about the Friday monthly job reports and the reports earlier in the week that hint at the Friday jobs report results: ISM, ADP, Challenger, Non-farm payrolls and the Unemployment rate scheduled for release.   Last month’s NFP report was very disappointing with job growth rising by a mere 36k.   A significant rebound is expected next week to around 176K and if it materializes, it could renew demand for the U.S. dollar by making an end to QE in June a greater possibility.  Note that rate increase expectations for the USD are very low vs. most other major fx, making the USD sensitive to even mildly positive data, especially after the, ah, fecal nature,  of the recent GDP, jobs, and other key reports.

     

    Fed Chairman Bernanke delivers his semi-annual monetary policy report before the Senate Banking Committee. This could be significant if Bernanke sheds new light on his thoughts about whether we can expect QE 3.

    EUROPE

    ECB rates and press conference – given the high interest rate hike expectations for the EUR Trichet is likely to send the EUR higher if he sounds hawkish and, per Kathy Lien, uses the magic word ‘vigilance’ regarding inflation. If he disappoints, he undermines the only fundamental support for the EUR in an atmosphere of declining risk appetite from the Libya turmoil and looming PIIGS debt issues.

    UK: Housing data, manufacturing & services PMI, inflation report hearings. With rate expectations priced in the GBP will now need signs of growth to suggest that even with spiking oil and new austerity spending cuts due to bite in the coming months, the UK economy actually could handle a rate increase too. Our take: dream on. BoE hints of rate increases are unlikely until it sees the UK recovery is on sounder footing and that austerity spending cuts and spiking oil have left the recovery alive.

    HIGHLIGHTS BY REGION IN CHRONOLOGICAL ORDER

    Events in boldface of prime importance

    Unites States (UUP, UDN)

    Monday – Jan. personal income & spending, Jan. PCE deflator, Feb. Chicago PMI, Feb, NAPM-Milwaukee, Jan pending home sales, Feb. Dallas Fed manufacturing activity index, Fed’s Dudley to speak

    Tuesday – Jan. construction spending, Feb. ISM manufacturing and prices paid, Fed Chairman Bernanke to give semiannual testimony at Senate

    Wednesday – Feb. ADP employment change, Fed’s Beige Book, Fed’s Bernanke to give semiannual testimony at House

    Thursday – Weekly initial jobless claims and continuing claims, 4Q F nonfarm productivity and unit labor costs, Feb ISM services, Fed’s Bernanke and Kocherlakota speaks

    Friday – Feb employment report, Jan. factory orders, Fed’s Yellen speaks

    Euro-zone (FXE, EUO)

    Monday – German Jan. import price index, EZ Jan. CPI

    Tuesday – German Feb. unemployment change and rate, German Feb. final manufacturing PMI, EZ Jan. unemployment rate

    Wednesday – EZ Jan PPI

    Thursday – Feb final German and EC services PMI, 4Q prelim EZ GDP report, EZ Jan. retail sales, ECB announces interest rates & press conference

    Friday – ECB’s Noyer, Weber, Draghi & Orphanides speak in Paris

    United Kingdom (NYSEARCA:FXB)

    Tuesday – Feb. Nationwide House prices, Feb. manufacturing PMI, Jan. net consumer credit, mortgage approvals

    Wednesday – Feb. construction PMI

    Thursday – Feb. hometrack housing survey, services PMI

    Japan (NYSEARCA:FXY)

    Monday – Jan prelim industrial production, retail trade, large retailers’ sales, Feb. small business confidence, Jan. vehicle production, housing starts, construction orders

    Tuesday – Jan jobless rate, household spending

    Thursday –4Q capital spending

    Switzerland (NYSEARCA:FXF)

    Tuesday – GDP q/q

    Thursday – Retail Sales

    Canada (NYSEARCA:FXC)

    Monday – 4Q current account, Dec. and 4Q GDP

    Tuesday – Bank of Canada rate announcement

    Wednesday – Jan. industrial product price and raw materials price index

    Friday – Ivey PMI

    Australia & New Zealand: (FXA, BNZ)

    Monday – NZ trade balance data, AU 4Q inventories, AU Jan private sector credit, Feb. NBNZ activity outlook and business confidence

    Tuesday – NZ 4Q terms of trade, AU Feb. AiG performance of mfg index, AU 4Q current account balance, net exports, AU Jan. retail sales, NZ ANZ commodity price, RBA announces cash target rate, RBA commodity price index

    Wednesday – AU Jan HIA new home sales, AU 4Q GDP

    Thursday – AU Jan building approvals, trade balance, AU Feb. AiG performance of service index

    China

    Tuesday – Feb. manufacturing PMI Thursday – Feb. services PMI

    Conclusions & RamificationsFOREX

    The primary trade developing: We see the EURUSD (FXE, EUR, UUP, UDN) topping out in the coming weeks around the 1.3700- 1.38600 range. We suspect Trichet is not going to get hawkish about rate hikes with oil spiking and 3 of the 5 PIIGS in need of additional assistance and doubt that any additional help will come while German officials once again are focused more on saving their jobs from angry voters rather than providing aid the PIIGS will need to avoid insolvency. Be ready to enter new shorts if Trichet indeed disappoints EUR bulls. If in fact he does sound more hawkish, hold off. Meanwhile we wait for a reversal in order to establish new shorts. Short term traders may attempt to play the rally at their own risk. We don’t see much upside after this week, especially with more PIIGS debt sales and EU summits coming that could well fail to help keep the PIIGS afloat unless Germany starts cooperating.  As we’ve said before, German officials won’t support a bailout until the EU hits a crisis and they can say they had no choice but to offer up cash or face an EU collapse.

    OTHER ASSETS

    (SPY, SDS, GLD, SLV)

    Stocks and commodities

    The 6 month uptrend is alive, having bounced higher off one of its plausible ascending trends line Friday, as shown in the daily S&P 500 chart below.

    ScreenHunter 20 Feb 27 09 151 1024x664  The Coming Week Feb 28-March 4: Calendar Highlights, Themes, Key Market Movers

    S&P 500 DAILY CHART COURTESY OF ANYOPTION.COM      20feb27 0915

    As repeatedly noted though, stocks are due for a breather and make a normal technical 5-10% retracement at minimum. Fed and ECB intervention has kept this rally aloft and we don’t fight trends regardless of their source. However a popular revolt in the MENA region is beyond their control. If oil prices continue higher, that could well provide enough of a bearish fundamental catalyst, so we really hesitate to go long risk assets until the MENA and oil price picture clarify. The key question we’re trying to answer is: are more oil producing nations at imminent risk of becoming another Libya and seeing production cut back.

    Making up for Libya’s 2% of world production will consume about 20% of OPEC’s spare capacity, so if more major producers are shut down oil could retest its 2008 highs and stocks along with other risk assets will be need some very positive news to avoid making deeper pullbacks than the above technical correction.

    GOLD AND SILVER

    (GLD, SLV)

    These are currency hedges, neither risk nor safe havens. Rising oil ultimately debases most currencies and is thus bullish for these.

    For a full listing of calendar events, their relative importance, previous and forecasted results, see www.forexfactory.com >> calendar tab.

    For more on last week’s primary market driver and its lessons for the coming week see: OIL’S WATERSHED WEEK, WHY IT CHANGES EVERYTHING, WHAT TO DO

    For more on our take on market direction for forex, stocks, commodities and bonds, along with their fundamental and technical drivers, see:

    For more on our thoughts about the state forex and other global markets and the drivers behind them:

    on Feb 24, 2011 • SPYDIAQQQQ

    on Feb 20, 2011 • FXAFXBFXC

    on Feb 18, 2011 • FXBFXEUDN

    on Feb 13, 2011 • FXEFXAFXB

    on Feb 10, 2011 • FXE

    on Feb 06, 2011 • SPYDIAQQQQ

    on Feb 06, 2011 • EUFNFXEIMF

    DISCLOSURE & DISCLAIMER: AUTHOR SHORT THE EUR FOR PERSONAL PORTFOLIO. THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER

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