Saturday, June 2, 2012

The Week Ahead: Trade, Bernanke, and Jobs Jobs Jobs

The week's big announcement is international trade at 8:30 a.m. Eastern on Friday, although there will be other reports and events during the week, especially Thursday, to keep traders on their toes.

International trade tells, among other things, how much more we're buying from China than we're selling there. It contains a hint at what impact recent slowdowns in China's economic growth will have on the American balance of trade.

Two leading economic indicators, both reported weekly, will be released on Thursday: Jobless claims at 8:30 a.m. and the money supply at 4:30 p.m. The M2 money supply numbers are generally what analysts look at most closely.

The jobless claims -- new applications for unemployment insurance -- will be a major player during the week, in light of last Friday's monthly employment statistics, which showed only 69,000 new jobs added to the economy in May, compared to a 1st-quarter average of 226,000 jobs added each month.

The employment report gives added gravity to Fed Chairman Ben Bernanke's testimony on Thursday at 10 a.m. before a Senate committee. Expect him to be pressed hard by Democrats on whether, and how much, and by what means the Fed will resume easing to avoid a dip back into recession, and by Republicans on whether the Fed will continue to battle valiantly, like Beowulf, to slay the evil dragon Inflation.

Monthly employment is a lagging indicator for the economy, but a leading indicator for elections.

May's low job numbers and 8.2% unemployment rate prompted a flurry of news stories noting that the last president to win re-election with unemployment over 8% was Franklin Roosevelt. But there are more nuanced ways of looking at the stats, for example, Nate Silver's analysis in the New York Times in early May, which I highly recommend.

Other reports of note:

Monday: Factory orders at 10 a.m.

Tuesday: Institute of Supply Management non-manufacturing index at 10 a.m.

Wednesday: 1st quarter business productivity and labor costs at 8:30 a.m., petroleum inventories at 10:30 a.m. and the Fed's Beige Book region-by-region economic survey at 2 p.m.

Money policy officials in addition to Bernanke are popping up like dandelions before a variety of podiums.

Four Federal Open Market Committee members are at the mic on Wednesday: Atlanta Fed Pres. Dennis Lockhart, San Francisco Fed Pres. John Williams, and two members of the Fed Board of Governors, Daniel Tarullo and Janet Yellen.

Two FOMC alternates are speaking on Tuesday: St. Louis Fed Pres. James Bullard and Chicago Fed Pres. Charles Evans.

Practical trading:

By my rules, as of Monday I can trade July vertical spreads and September single options and straddles. The short legs of diagonal and calendar spreads expire in June, although it's a bit late to trade them, and new long positions of those spreads must expire in December or later. Of course, shares are good at any time.

Good trading!

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