Well Next week, Will I cry for a Market that deserves to die, or rather an overbought market finally continuing its downtrend or will it just be Chop Suey?
For next week we have FOMC meeting, which normally the market chops leading into that. We also have the third revision of our GDP data and the Weekend brings us the G 20.
We have the same trading range from last week with a high of 1124ish and support in the 1054ish range. Euro/USD still has that key 1.2132ish range to watch. In addition, Shanghai Comp is weak again tonight, so we could be seeing it test its recent lows 2511 next week, tonight it is down to 2514ish. Bottom-line, the market is overbought and mainland China is weak so our market may finally sell off?
Also, keep your eyes open on Home Sales Data and a few home builders because they could have a short squeeze if the data is “not a miss” after all the weak data that has been coming out since the tax credit ended.
Monday
There is very little data coming out. In Australia we have the New Vehicle Sales which is considered an indicator for consumer confidence. In addition, I will be watching the Iron Ore Spot price out of China and India. After China being on vacation for most of this past week the spot market has been flat with very little activity, we will see if the buyers will be back on Monday.
In the United States, not much in regards to economic data, there is a Bond Auctions at 11:30 for 3 and 6 months bills.
How to Trade This
No real data at all. This means that the market will just follow the trend from Friday normally. One interesting note, Market Semiotics’ Woody Dorsey proprietary sentiment readings pointed to “upside tries” since June 9th. He has indicated that it could point to a bounce into June 18-23 before giving way to the Summer Bummer he’s been predicting for months
Tuesday
Overnight we will get the Germany Ifo Data; this is the twin brother of the ZEW survey. The Ifo Business Climate Index is based on 7,000 monthly survey responses of firms in manufacturing, construction, wholesaling and retailing. In Germany. The firms are asked to give their assessments of the current business situation and their expectations for the next six months.
In the US session, we will get Canada CPI data that could show a possible increase in inflation which could give Canada rate hawks a boost and help Oil if the Euro is stronger by raising the Looney pairs.
In the US, we get Existing home sales which are released by the National Association of Realtors and it provides an estimated value of the housing market for May. We also get Aprils Housing Index from the FHFA..Federal Housing Finance Agency which should have good numbers due to the fact it was before the end of the Tax Credit. We also get to hear from the Federal Reserve Bank of Richmond (that is Virginia, Caroline area). It’s a survey that includes information on shipments, new orders, order backlogs, and inventories and information on current activity in the manufacturing sector there.
At 1est we have the 2 year note auction. Last month results were soft, with the auction nearly 1 basis point over the 1:00 bid with the non-dealer takedown of 51 percent below the 55 percent average. Bid to Cover was at 2.93 which was the weakest of the last four auctions, yet the 2009 bid to cover was an average of 2.40. Before JEF, WAG, Ccl, after bell adbe,jbl report earnings.
How to Trade This
Last week the German Zew data was way below estimates. Instead of the Euro selling off there was Central Bank buying which caused a short squeeze of the euro/usd. The German Ifo Data will probably also be weak, we need to watch if central banks will come into the market again to try and support the Euro again. Since last week a lot of the shorts did get shaken out so I would not expect such a jump up on bad data. The focus is to see how the Euro and European Markets moves when the data is released. If nobody comes in to support it, we could get the movement we should have had with the bad Zew data last week. This would of course would cause a selloff in the commodities and other global growth plays.
Yet, even with that, the day when the Fed starts their meeting and the day before its Rate Policy announcent is normally just choppy as everyone is focused on what they are going to say.
Wednesday
Late at night we will get the release of the Bank of England’s Minutes of their last meeting.
In the US session we get Canada Retail Sales. Plus, more Housing Data with the US New Home Sales data from the Census Bureau comes out for May.
At 1est we get the 5 year treasury auction, last month the results were also soft with a bid to cover at 2.71, slightly lower than the previous month. Retail Dealers ended up taking a 44 percent share of the auction, slightly higher than average. The auction stopped out at 2.13 percent in 2009 the average bid to cover was cover was about 2.35 in 2009.
Then we get what we all have been waiting for the FOMC Interest Rates Release at 2:00 est. Of course they will be leaving rates the same but we will all be listening along to hear if all the words are the same from last month. Which they probably will be. Before the bell we get earnings from RAD, KMX and after the close we get earnings from BBBY, DRI, NKE, and CKE among others.
How to Trade This
FOMC Chop Dance for the Morning. We will be watching to make sure that the 5 year auction goes OK at 1 est. CarMax KMX will be a very interesting earnings due to whether there is a demand still for used cars which everyone has been playing. But normally people say to wait a few minutes before you trade on the release of the minutes because there is normally a head fake in the wrong direction.
Thursday
In the European Session we get EMU’s industrial new orders from Eurostat. Which captures the value of new contracts for goods in the manufacturing sector; this is April Data so with the recent slowdown in China take it for whatever it is worth.
In the US Session we get from the Bureau of Census the May US durable goods numbers. This measures the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. It should be in line at this point.
At 1 pm EST we have the 7 year auction. Last month’s auction went better than the 5-year and 2-year auctions. Bid to Cover was respectable at 2.88. Retail demand was also respectable with dealers taking 38 percent vs. an average of 37 percent for this issue. 2009 bid to cover average was around 2.57. For earnings before the bell we get CAG, LEN and after the close ORCL, PALM, RIMM.
How to Trade This
As long as the 7 year auction goes ok we should continue the trend that started right after the FOMC announcement.
Friday
In the Asian session we get the China Business Sentiment Survey data. In the US session we get the First Quarter, Third Estimates of the GDP and First Quarter revised Corporate Profits. Before the bell we get earnings from KBH.
How to Trade This
The GDP data should be inline. Friday is normally known for risk off leading into the G 20. But, we may have shorts cover in the last hour of trade.
Weekend G 20 Meeting
Glocal crisis will be high on the agenda at the G20 summit in Toronto on June 26 and 27. Europe will be pushing for global taxes on the banks and financial transactions. China has also been saying that their Currency should not be a subject of discussion. Normally these meetings have high hopes but they normally turn into photo sessions.
PS…I never mention regular weekly data in these articles. As we all know we get our Redbook, GS/ICSC retail sales data on Tuesday. Unemployment Data on Thurs .Tuesday API data after the close. Wed Oil Inventory and MBA Applications and Thur Nat Gas inventory data.
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Nymph, as always, your input is very appreciated. Very valuable, indeud!
Kneizi, Thank you. I actual like it because it allows me to focus my thoughts for the coming week and it is a great reminder during the week of what I was thinking……BTW did you notice in last weeks article I called a top range of 1121ish…IMHO the more I do all this the better I should get at it cuz it’s the same data mostly every month.
I noticed, but generally I don’t put much emphasis on specific numbers, because I look mostly for conceptual clues (e.g. why and how an event in country A affects country B). The most difficult, as we observe now in the present market, is to figure out why it reacts in a certain way when data point to the opposite direction. In other words I find it the trickiest to understand the reasons for divergence in price action and the underlying and also to figure out timeframes for convergence. I think it only comes with experience, and you are a living proof to that.
Excellent post – even by your high standards. Thanks for sharing your research and opinion. BTW – Kudos for your call last week.
Mel, Thank you so much, it really means a lot. I have been only doing this type of article for about 6 weeks or so, so each week I am trying to tweek it to make it a little bit better. That is why I love comments on it so I can figure what else to approve on.
Your bkog doea not show others comments- tell jeremy!
Rand I will ask Jeremy…so comments aren’t showing? Also UPDATE, CHINA this WEEKEND is saying that they may make changes in the Yuan,. That could be the key catalyst that we need for that sell off.,,http://www.china.org.cn/business/2010-06/19/content_20298470.htm
Wow, that is a lot of good sense. By the way, i cannot read others blog on your page, glitch in system?
Wheredya go?
I am here. I will find out what happened to the other post.
I did miss the rebalance…I seem to always miss that