Wednesday, February 23, 2011

2/24 Almanac

On Thursday, Feb. 24: Jobless claims, durable goods, new home sales.

There are 23 days before March options expire, 51 the April and 86 the May.

On the jump, market stats, econ reports, and the trading calendar . . .


Blue chip stocks (SPY) closed the latest regular session down 0.6% from the prior close. During the day SPY traversed 1.4% in a net move down of 0.6%.

The day's extremes: Open $131.75, high $132.07, low $130.21, close $131.03.

SPY traded entirely within the DeMark pivots. The next DeMark pivots are $129.69-$131.55.

In total, 3.8 billion shares were traded on the three major U.S. stock exchange, 8% more than on the prior trading day.

Five-year bond yields imply inflation at 2.58%, 10 basis points more than on the prior trading day. That's a huge jump. A week ago anticipated inflation was at 2.31%, so today's number is up 27 basis points in just a week.

Scenarios: :-) The markets are thrilled at the prospect of recovery and anticipate the Fed will act soon to cool things off. :-( The markets are convinced that civic conflict in North Africa will continue to send energy costs soaring, increasing inflation, which must be priced into bond yields.

Take your pick. I'm leaning toward the frowny face.

Econ reports:

Durable goods are things that hang around a long time. They cost a lot, and you've got to be pretty sure that they'll be useful and that you can afford them before you buy. So the durable goods report, out at 8:30 a.m. Eastern, is an excellent measure of confidence in the economy's future course. I like it because it tracks money as a avatar of opinion, rather than opinion itself. A dollar spent on durables is an opinion with skin in the game. Otherwise, talk is cheap.

Weekly jobless claims, also out at 8:30 a.m., track how the jobless recovery is progressing, and new home sales look at how new construction is faring on the market. My guess: Not so good, with so many foreclosed potential existing home sales languishing on the streets of cul de sacs of suburbia.

Another housing report, the Federal Housing Finance Agency index, is out at 10 a.m. Its methodology is closely tied to loans by two government-sponsored (now sort of government-owned) enterprises, Fannie Mae and Freddie Mac.

The two weekly energy reports are on the same today this week because of the holiday: Natural gas at 10 a.m. and petroleum inventories at 10:30 a.m.

The Fed closes the day with its weeklies: The balance sheet and money supply, both at 4:30 p.m.

Treasury auctions seven-year notes at 1 p.m.

St. Louis Fed Pres. James Bullard gives a speech. He is not a member of the Federal Open Market Committee and so has no direct say in monetary policy. Nice man, I'm sure, but irrelevant to my trading.

The Federal Reserve often posts transcripts of speeches and testimony within a few days of the event.

Trading Calendar:

By my rules, at this point in the cycle I can trade March vertical, diagonal, butterfly and calendar spreads, iron condors and covered calls. Also, May or later straddles, calls and puts. And of course, shares are good at any time.

Good trading!

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