Total Lunar Eclipse of the Moon on the Winter Solstice

Ominous Week Ahead

Is it an omen, with a total lunar eclipse of the moon falling on the winter solstice, the shortest day of the year? Have the Mayans correctly mapped the end of the world, with the start marked by this rare cosmic event? Maybe. But we believe there are plenty of other more tangible reasons to hedge your risk over the short-term.

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Total Lunar Eclipse of the Moon on the Winter Solstice

Is it an omen? Is it a chance coincidence? Is it the start of the Mayan calendar countdown to the end of days? Maybe… In the early morning hours of Tuesday December 21st, the winter solstice and the shortest day of the year for the Northern Hemisphere, the moon will pass completely through the earth's shadow. It is a cosmic event that has not occurred in about 500 years, and in the year the Mayans predicted would start the countdown for the end of the old world no less. This uncannily timed full eclipse of the moon is a bit bothersome to me, and the week should be of concern to you to as well, but perhaps for other more tangible reasons.

You see, bloody war threatens this week, as South Korea prepares for live fire drills near Yeonpyeong Island, the site of the last scuffle between North and South Koreas. North Korea warned of "catastrophic events" should the South follow through with its plans, but later backed off. Just weeks ago South Korea practiced nationwide war drills that more than ten million of its citizens took part in.

Meanwhile, the West's economic warfare is finally scoring a meaningful blow to the common man in Iran. On Sunday, feeling the heat, the Iranian government was forced to end subsidies on certain products including gasoline. The impact pushed gas prices 400% higher in some places overnight, and might drive a renewal of the fuel driven riots seen in 2007. Mahmoud Ahmadinejad also recently abruptly fired his foreign minister and replaced him with the nation's nuclear chief. That's probably and indication that the issue of debate between the two was nuclear related. Civil unrest in Iran is one of the last chances for the West to avoid an ugly war that could drive gas prices higher globally. But is Ahmadinejad preparing a government of his own to replace the Ayatollah's by surrounding himself with friends? One lightly covered Wikileak implied the Supreme Leader of Iran might have terminal cancer, so perhaps the President is planning ahead.

And in the US this week, terrorism seems more likely than in any year since 2001. The possibility of subway attacks in New York seem likely to me, not just possible anymore. While it will not stop me from riding the 4,5 train through Grand Central Station, it probably should. First of all, the NYC subway system has been atop the list of potential trouble spots since the beginning. Last year, some nut tried to blow up his underwear in an airplane, this year a maniac loaded up a truck with explosives and parked it in Times Square. Religious targets are also rising in importance for the enemy, as Christians are now being targeted in Iraq.

Yep, Wall Street Greek is suggesting it would be wise to take a defensive position through the holidays for this reason, or at least hedge well, because chatter is picking up. With gold so pricey, maybe look toward oil, but also the usual stocks that garner attention when terrorism strikes, the anti-terror stocks like American Science & Engineering (Nasdaq: ASEI) and the biotechs that protect against bio-warfare, like Seattle Genetics (Nasdaq: SGEN) and others. Defense stocks might garner some interest again, though they have already been on the rise since the beginning of the year despite US fiscal debate. Just look at the chart for the Powershares Aerospace & Defense (NYSE: PPA).

As far as the economic schedule goes this holiday shortened week, it will include a short list of reports. Investors will want to pay attention to November's Personal Spending data, Existing and New Home Sales, the final reporting of Q3 GDP, Michigan Consumer Sentiment and Durable Goods Orders. There will be important overseas activity in Japan and Greece this week, along with the attention on Korea and Iran.

Monday

The Chicago Federal Reserve publishes its National Activity Index on Monday. The Chicago Fed's index basically looks at a series of other economic indicators and attempts to pull the economic puzzle together. It is a cyclical indicator.

Otherwise, the geopolitical topics discussed in our preamble should garner most of the media attention. It is possible some M&A announcement, news on Wall Street bonuses, or DC doings might also guide the way.

As far as the corporate wire goes, Genzyme (Nasdaq: GENZ) is having an investor event for its Alemtuzumab medication, a drug treatment for multiple sclerosis. Hansen Natural (Nasdaq: HANS) meets with investors after the close of trading. Sunstone Hotel Investors (NYSE: SHO) is holding a conference call for its senior leadership restructuring effort. Incitec Pivot (OTC: ICPVF.PK) will hold its annual general meeting and webcast. IPO lockup restrictions end on Hudson Pacific Properties (NYSE: HPP). The EPS schedule includes Adobe Systems (Nasdaq: ADBE), Darden Restaurants (NYSE: DRI), Jabil Circuit (NYSE: JBL), Paychex (Nasdaq: PAYX), Drinks Americas (Nasdaq: DKAM) and more.

Tuesday

The shortest day of the year will also offer a total lunar eclipse, so that the moon will disappear from view for more than an hour. Eastern viewers in North America will want to look skyward around 1:15 AM ET.

The first news Tuesday will likely arrive from the Asia-Pacific region, as the Bank of Japan (BOJ) produces its latest monetary policy statement. Expectations are for the BOJ to keep current measures unchanged and rates steady. Back home, the US government will produce some of the first data from the 2010 census. Also, the Federal Communications Commission (FCC) is scheduled to vote on net neutrality.

The International Council of Shopping Centers (ICSC) will produce its latest report. Last week's data covering the period ended December 11 showed same-store sales increased 0.8% week-to-week, and 3.1% year-over-year. Redbook reported sales increased 2.5% year-to-year for the same period. This latest data will cover the period ended December 18, which includes last Saturday, an important day for shopping (final weekend ahead of Christmas).

Alliant Energy (NYSE: LNT) will make its guidance announcement. Ametek (NYSE: AME) will split its shares 3-for-2 Tuesday, and IPO lockup curbs conclude for Fabrinet (NYSE: FN). The EPS schedule highlights reports from Nike (NYSE: NKE), Carnival (NYSE: CCL), Cintas (Nasdaq: CTAS), ConAgra (NYSE: CAG), Red Hat (NYSE: RHT), CarMax (NYSE: KMX), Commercial Metals (NYSE: CMC), CPI Corp. (NYSE: CPY), Emcore (Nasdaq: EMKR), Finish Line (Nasdaq: FINL), FSI International (Nasdaq: FSII), Hovnanian Enterprises (NYSE: HOV), Progress Software (Nasdaq: PRGS), Rodobo (Nasdaq: RDBO) and TIBCO Software (Nasdaq: TIBX).

Wednesday

Housing data dominates Wednesday, starting with the early morning release from the Mortgage Bankers Association. The MBA reported last week for the period ending December 10. Mortgage activity, based on the Market Composite Index, decreased 2.3% in that period. The seasonally adjusted Purchase Index fell 5.0%, while the Refinance Index slipped 0.7%. The culprit behind the deterioration here was the well-publicized increase in long rates and mortgage rates, with the average contracted rate on 30-year fixed rate mortgages rising to 4.84%, from 4.66%.

At 10:00 AM, you will want to attune yourself to the National Association of Realtors' release of the Existing Home Sales data for November. Economists expect the pace of sales to have improved through the month, to an annual rate of 4.75 million. In October, the pace of sales deteriorated by 2.2%, to 4.43 million. Housing inventory was marked at 10.5 months. If the rate of sales improved in November, you should expect inventory to improve as well.

Also at 10:00, look for the FHFA House Price Index. This index measures only Fannie and Freddie sponsored deals, and so it is incomplete. We rather direct you to the pricing data from within the NAR's report at the same hour.

At 8:30 AM ET, before the housing data releases, catch the final reporting of third quarter gross domestic product. Economists expect a significant upgrade here, to a 3.0% rate of growth. At last check, Q3 GDP was measured at +2.5%. Corporate Profits are also reported with the GDP data.

Catch the EIA's Petroleum Status report at 10:30 AM ET. Last week's report, which covered the period ended December 10, showed crude oil inventory fell by 9.9 million barrels. Inventory still held above the upper limit of the average range for this time of year. Gasoline stores increased by 0.8 million barrels last week, and are within the upper half of the average range for this time of year.

On the overseas wire, look for news from Greece. The Greek Parliament will have a budget vote.

The corporate wire highlights Toyota's (NYSE: TM) introduction of its redesigned Vitz subcompact car. The corporate EPS wire keys on housing and related stocks, with reports from Hovnanian (NYSE: HOV) and Bed Bath & Beyond (Nasdaq: BBBY). Also look for news from Walgreens (NYSE: WAG), American Greetings (NYSE: AM), Finish Line (Nasdaq: FINL), Arrowhead Research (Nasdaq: ARWR), China Direct (Nasdaq: CDII), Christopher & Banks (NYSE: CBK), Lindsay (NYSE: LNN), Micron Technology (NYSE: MU) and Navistar (NYSE: NAV).

Thursday

A slew of reports litter Thursday's slate, due to the holiday Friday. Markets are closed in Japan for the Emperor's birthday. In the States, fixed income markets close at 2:00 PM ET.

The Personal Income and Consumption Report for the month of November, due for release at 8:30 AM ET, is perhaps the most important report of the day. Investors will be watching how well Consumer Spending did through the important period. Economists surveyed by Bloomberg are looking for Personal Spending to have increased 0.5% month-to-month, which would compare against the 0.4% increase in the prior period. Personal Income is significantly less important to investors, but economists will look for a 0.2% increase there. The Federal Reserve's favorite inflation gauge and an important cog in its monetary policy setting, the Core PCE Price Index, is seen increasing 0.1% in November.

Durable Goods Orders (8:30 AM) are expected to have decreased 1.0% in November, based on Bloomberg's survey of economists. This would compare against the 3.4% decrease marked last period. Remember that Durable Goods Orders swing wildly and are expected by economists to offer some surprise, even when excluding the pricey transportation sector.

Weekly Initial Jobless Claims improved again last week, to 420K for the week ended December 11. The four-week moving average extended its streak of improvement to six consecutive weeks, and marked 422,750. The market would appreciate a further reduction this week, should it materialize.

At 9:55 AM, look for the Reuters/University of Michigan Consumer Sentiment Index release. Economists expect sentiment to gain to 75.0, from the 74.2 early December take. This too should also play an important role in the direction of stocks, while reported at the midnight hour of holiday shopping.

At 10:00 AM, New Home Sales for the month of November will complement the Existing Home Sales data from earlier in the week. Economists forecast the annual pace of New Home Sales will have gained to 300K, up from 283K at last check. Supply increased to 8.6 months due to the slowing of the pace of sales in October. Toll Brothers (NYSE: TOL) and friends are benefitting.

The EIA reports on Natural Gas Inventory at 10:30 AM ET. Last week's report covering the period ended December 10 showed Natural Gas stocks declined by 164 Bcf. This placed inventory below last year's level, but above the five-year average mark.

Thursday's corporate wire highlights the EPS report of Subaye Inc. (Nasdaq: SBAY), and also the report of Asahi Co. Ltd. Osaka (Tokyo: 333300.T).

Friday

Markets are closed on Christmas Eve across the Americas and Europe, as well as in Hong Kong, South Korea, Australia and most of the world. Markets are open in Japan. Christmas Eve also marks the deadline for Iraq to form a government.

Pray the Lord and the US government keeps us safe this concerning holiday season. Merry Christmas and peace to all!

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