Many of you may be asking yourself, “what’s changed since last week with the EU bailout?” One would think there would surely be some sort of news or development concerning the exact structure of this plan, rumored to be a sovereign debt backstop of $1 trillion USD. There MUST be some plan moving forward? Right?

What we know so far is that Merkel and Sarkozy have rounded up the kids and sought refuge in the family station wagon just before the CDS Grizzly Bear mauled the young sickly kid with a limp. All that we have in ink is that the ECB is planning to contribute 60 billion Euros, the Eurozone states are commiting 440 billion Euros, and the IMF is on the hook for 250 billion Euros; summing a total package at a nice round 750 billion Euros. The squarely trimmed package is so arbitrarilly gigantic that the issue was immediately branded as an “all in” poker bet.  To us it looks more like a re-raise. An “all in” move wouldn’t be such a handsome dividend… we digress.

Alas, we know that EU states’ individual fates are now wound closer together, but we’re not sure if this is better or worse for the group. Simple reasoning would suggest that the strongest of the Eurozone (Germany and France) are worse off, while the weakest (Portugal, Italy, Ireland, Greece, and Spain) are better. Talk to the SPX, DAX, or CAC 40 last week and they’ll tell you how they feel about the plan.

While we got some stabilization in markets on Friday, we are expecting to see some more gains early in the week as bulls have had a chance to lick their wounds and venture back for some “opportunities”. They are of course lunatics, since nothing has changed in Europe and the jobless claims reports have run out of seasonal excuses.

Econ Data

On to the U.S. Economic Data… Econ data this week should be watched and only traded on if reports come in worse than expected. The trend towards negative sentiment with respect to econ data, that began two weeks ago, is strengthening, and will allow for only temporary pops in equities and energy prices.

Monday we’ll see a really strong Existing Home Sales report, which will probably help to add relief to U.S. equities. The report focuses on the data from April, when first time buyer tax rebates expired, but the weekly mortgage purchases index has discounted most of the news into shares. Economists expect the annual rate to jump from 5.35 million units in March to 5.6 million in April.

Tuesday will start with more housing news from the April Case Shiller HPI, which has showed prices plateauing despite increasing sales. A decrease in the HPI argues against a sustainable housing recovery, and suggests that sellers are focused on liquidating inventory before stimulus supported buyers disappear. Later in the day we’ll get the Consumer Confidence Report, which is expected to report an increase from 57.9 t0 59.0 from April to May. We’re expecting this report to disappoint badly, as geopolitical factors out of the EU effected global economic sentiment.

Durable Goods Orders will kick off Wednesday’s data, and will most likely continue reverse the -1.3% drop in March, as economists at Bloomberg expect orders rose by +1.5% in April. The March drop was explained by a drop in the volatile transportation portion of the series, where the non-transportation orders actually rose by a revised +3.7%. Later in the day, New Home Sales are expected to add to the 26.9% gain in March. The annual sales  rate is expected to rise from 411,000 to 425,000 in April on continued strength tied to the housing stimulus that is now expired.

Keep an eye on the EIA Petroleum report for further gains in Crude dry inventory, and also for a reversal in the recent trend of dwindling gasoline supplies.

Thursday morning, we’ll get a revision of Q1 GDP, which is expected to rise from the previous reading of 3.2% to 3.5%. However, the main focus of the day, and quite possibly the week, will be the Jobless Claims Report. Last week initial claims jumped to 470,000 without any special factors, yet this week analysts expect the figure to revert the mean, near 450,000. If jobless claims continue higher above 470,000, we will see markets in the U.S. sell-off aggressively into the weekend.

The beginning to the end of the week on Friday will be Personal Income, expected to rise from 0.3% to 0.5% from March to April, while consumer spending cools from 0.6% to 0.2% over the period. Later we’ll hear from the Chicago PMI, which has been targeted to drop from 63.8 to 62.0 from April to May. Most importantly, the mindset of consumers in the Consumer Sentiment Report will help investors better understand the degree to which recent market turmoil has effected sentiment. The statistic is expected to stay constant at 73.3 for the final reading of the May report, so look for negative response to anything at or below that figure.

We’re looking for entry points to short U.S. equities and Crude Oil, while waiting for a drop in the VIX to go long. Stay vigilant and watch LIBOR this week, as it’s just crossed .50 for the first time since July 16, 2010.