‘If you are going to be wrong, be wrong quickly with a de minimis loss of capital’.” — unknown

1. Chinese Army Unit Is Seen as Tied to Hacking Against U.S. — according to NYT , Chinese army unit 61398, also known as “Comment Crew,” has been identified as most probably responsible for numerous cyberattacks on U.S. targets, security company Mandiant has alleged in a report. While Mandiant didn’t name specific targets, victims include Coca Cola (KO) and VMware’s (VMW) RSA, as well as a firm with access to over 60% of oil and gas pipelines in North America.
2. NY Fed wants to let BofA off over AIG assets — the NY Fed is apparently trying to let Bank of America (BAC) off the hook for possible sizable legal claims related to former AIG (AIG) mortgage securities held by Maiden Lane II following the insurer’s bailout in 2008. AIG has sued BofA to recover some of the $18B losses it suffered on the assets, but the bank argues that AIG gave its right to sue to the NY Fed when it sold the assets.
3. Bank of England chief wanting more asset buying — Bank of England Governor Mervyn King and two other officials voted to restart government-bond buying earlier this month, showing the bank closer than expected to taking more action to lift economic growth.
4. Japan’s trade deficit hits fresh record — Japan’s trade deficit increased to a record ¥1.63T ($17.4B) in January from ¥641.5B in December, due to the sharply weaker yen and higher energy imports. However, exports climbed for the first time in eight months, growing 6.4% on year to ¥4.8T, with sales to China increasing for the first time since May. Exports to the U.S. were +10.9% but to the EU -4.5%. Imports rose 7.3% to ¥6.43T.
5. Euro-zone Feb. PMI signals steeper downturn — the euro-zone downturn appeared to steepen in February, with the preliminary composite purchasing-managers’ index, or PMI, for the region slumping to a two-month low of 47.3 from a January reading of 48.6, according to Markit. A reading of less than 50 indicates a contraction in activity.
6. Moody’s Investors Service cut the U.K.’s AAA credit rating — the pound fell to its weakest level in almost 16 months as Moody’s cited weakness in the nation’s growth outlook and challenges to the government’s fiscal consolidation program.
7. S&P500 Trend Lines Support — below is the chart of the trend lines support for the S&P500 (SPX)after last week losses in the major indexes .

The week ahead — Economic data from Econoday.com:

“There were times when my plans went wrong and my stocks did not run true to form, but did the opposite of what they should have done if they had kept regard for precedent.” — Jesse Livermore

1. Pope Benedict XVI resigns — Pope Benedict XVI has become the first Roman Pontiff since Pope Gregory XII in 1415 to resign, saying he will leave office on February 28 due to his failing health.
2. Eurozone recession deepened at end of 2012 — the economy of the 17 nations in the euro shrank by 0.6% in the fourth quarter, which was worse than forecast. It is the sharpest contraction since the beginning of 2009 and marks the first time the region failed to grow in any quarter during a calendar year.
It followed news that the economies of Germany, France and Italy had all shrunk by more than expected.
3. Fracking in New York could be held up for months — New York state’s decision to lift its ban on fracking faces further delays after officials conducting a key health impact study asked for more time. The move will push back the publication of the state’s environmental report, which in turn will delay the drafting of Governor Andrew Cuomo’s drilling regulations, possibly forcing a re-start of the regulatory process.
4. Bank of Japan keeps policy unchanged as recession continues — the Bank of Japan has maintained the size of its asset purchase program at ¥101T ($1T) and its benchmark interest rate at 0%-0.1%. The BOJ’s decision followed news that Japan’s economy had contracted for a third quarter in Q4 as GDP shrank 0.1% Q/Q vs consensus of +0.1%, with declining exports and a drop in business investment offsetting improved consumption.
5. G-20 Meeting Interests Converged on Infrastructure — The G-20 meeting brings into focus poorer countries’ difficulties in paying for the construction of roads and bridges and other basic infrastructure essential for development. Currency movements was discussed but Japan was not singled out.
6. Momentum for Internet sales tax strengthens –Legislators introduced the Marketplace Fairness Act in the Senate, which would enable states to collect sales taxes for online transactions carried out in their jurisdictions.

The week ahead — Economic data from Econoday.com:

“A loss never bothers me after I take it. I forgot it overnight. But being wrong — not taking the loss — that is what does damage to the pocketbook and to the soul.” — Jesse Livermore

1. Political uncertainty in Spain and Italy spooks markets — Spanish PM Mariano Rajoy tried to fight off allegations that he and other leaders in his party took bribes, while in Italy, Silvio Berlusconi’s party is surging in the polls ahead of upcoming elections as he promises to tear up “German-imposed” austerity policies and cancel a despised property tax.
2. Oil firms, environmentalists jockey for position over California shale — Oil companies such as Occidental Petroleum (OXY), Venoco (VQ) and Hess (HES) are looking to exploit California’s Monterey Shale, whose untapped deposits are estimated at 15.4B barrels, or over four times the reserves in the Bakken Shale. However, the industry is facing stiff opposition from the state’s environmental lobby, which is concerned about the substances used in fracking and the potential for setting off earthquakes.
3. Justice Department Filed Suit Against Standard & Poor’s, a unit of McGraw Hill Cos. (NYSE:MHP) — The DOJ’s lawsuit, joined by several states, seeks $5 billion in damages for losses to pension funds, banks and other financial institutions the government alleges were caused by the way S&P rated structured investments such as collateralized debt obligations in 2007.
4. BOE leaves policy unchanged — the Bank of England (BOE) has again left its monetary policy unchanged, with its benchmark rate staying at 0.5% and its QE program dormant.
5. Ireland’s hopes rise for debt refinancing — a reluctant ECB is close to agreeing to a refinancing of Ireland’s debt after the country’s parliament authorized emergency legislation to dissolve the former Anglo Irish and Irish Nationwide banks, now merged into IBRC, and sell their remaining assets of up to €14B to a bad bank.
6. Indian Economy to Grow at Weakest Pace in a Decade — per WSJ, India’s growth will decelerate this FY to 5% from 6.2% last year, the statistics ministry has said in a forecast that is lower than a recent finance ministry outlook of +5.8%. The slowdown is due to continued weakness in manufacturing and farm output, with the economy being hampered by a lack of reform, wide fiscal and current account deficits, and high inflation.
7. Consumer Sentiments Bullish — chart below shows Newsletters are the most bullish since 2010.

The week ahead — Economic data from Econoday.com:

“The four most dangerous words of all time, “It’s Different This Time!” — unknown

1. Cosco, China’s largest shipping company by fleet size Expects Large 2012 Loss — WSJ, Chinese shipping giant Cosco has warned it expects to report a large loss for 2012 due to the combination of weak demand in the dry bulk shipping market and escalated fuel costs.
2. Japan forecasts 2.5% growth — the government in Japan estimates GDP will increase 2.5% for the fiscal year which begins in April, higher than its previous outlook for 1.8% growth. Strong export outflows and higher capital spending from the government are both expected to provide boosts.
3. Shanghai Composite Enters Bull Market on Economic Growth — The Shanghai Composite Index (SHCOMP) climbed 0.5 percent to 2,358.98 at the close, extending its advance since Dec. 3 to 20 percent, a threshold signaling a bull market to some investors. The Shanghai Composite exited its longest-ever bear market. A 756-day stretch without a 20 percent gain from Nov. 8, 2010, through Dec. 3 is the longest on record, according to data compiled by Bloomberg and Birinyi Associates Inc. The gauge fell 38 percent during the period.
4. U.S. economy shrinks 0.1% in fourth quarter — MarketWatch, government data showed the U.S. economy shrank in the fourth quarter for the first time since the recession, but the nation appeared to still be on a mild growth path if unusual factors are stripped out. The fourth-quarter retreat mostly stemmed from lower inventories and a plunge in military spending. Spikes in those two categories had given growth for the third quarter an exaggerated pop, and economists expected them to be reversed.
5. S&P500 (SPX) Shows Triple Tops (Bearish) OR Inverse Head-n-Shoulder Pattern (Bullish)? — below is a chart of the SPX from 1993 to Present.

6. Japanese industrial output points to recovering economy — Japan’s industrial production recovered to rise 2.5% on month in December vs -1.4% in November, although the growth was below consensus of +4.1%. With the companies surveyed for the report expecting more gains in January and February, the data adds to other metrics which indicate that the economy could be rebounding from its recent slump.

The week ahead — Economic data from Econoday.com: