Sunday, April 22, 2012

The Week Ahead: Big guns

This is a week when the Big Guns of economic reporting are rolled out: A two-day meeting of the monetary policy committee, capped by a news conference with Chairman Bernanke, plus durable goods orders and the GDP.

Wednesday's Federal Open Market Committee announcement at 12:30 p.m. Eastern, the release of FOMC members' economic forecasts at 2 p.m. and Chairman Ben's newser at 2:15 p.m. have, I think, the greatest market-moving potential.

We are in a period when the recession lies behind us and the recovery is taking hold. The FOMC's job is to take away the cake and punch just as the party start's getting fun. When will the Fed begin to tighten? How hawkish will they be in stomping on inflation?

Wednesday's Fed events will provide important windows into the committee's thinking.

Durable goods orders, also out Wednesday, at 8:30 a.m., provide a window of another sort: Into corporate and consumer comfort with the course of the economy. The big ticket capital expenditures known as durable goods won't be ordered unless there is confidence in economic growth. The report may focus on durable goods, but I think of it more as an assessment of psychology.

The gross domestic product report, at 8:30 a.m. on Friday, provides the first comprehensive look at how the economy fared in the 1st quarter. The GDP figure will be revised twice in ensuing months, but it is this initial advance report that tells the tale.

Other events of note:

Tuesday: The S&P Case-Shiller home-price indexes for 20 metro areas at 9 a.m., and new home sales and consumer confidence at 10 a.m.

Wednesday: Petroleum inventories at 10:30 a.m.

Thursday: Weekly jobless claims at 8:30 a.m. and pending home sales, contracted but not closed, at 10 a.m.

Friday: The employment cost index -- that's wages, salaries and benefits -- at 8:30 a.m., and the University of Michigan's consumer sentiment report at 9:55 a.m.

We're still deep in 1st quarter earnings season, so expect the unexpected in that area to have major impacts.

Practical trading:

By my rules, as of Monday I can trade May calendar, butterfly and vertical spreads, covered calls and diagonal spreads and iron condors, and August single options and straddles. Of course, shares are good at any time.

Good trading!

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