Sunday, September 9, 2012

The Week Ahead: Inflation Meme

Economics is politics these days. Last week was the employment report, so the meme of the week was the administration's failures (successes) in creating jobs.

This week we get the consumer price report, so the meme will be the threat (improbability) of inflation because of the administration's recklessly inflationary (responsibly stimulative) policies.

The CPI will be published Friday at 8:30 a.m. Eastern, concurrently with retail sales and shortly before industrial production at 9:15 a.m.

Friday is a big day -- not only for the econ reports but also because late in the day option traders typically will begin to unwind positions that expire Saturday, Sept. 22.

Consumer inflation will get a sneak preview with the producer price index out Thursday at 8:30 a.m.

Playing into the inflation/stimulus meme, the Federal Reserve's Open Market Committee meets Wednesday and Thursday, announcing results at 12:30 p.m. Thursday, followed by committee member forecasts at 2 p.m. and Chairman Bernanke's news conference at 2:15 p.m.

Leading indicators out this week:

Average weekly initial jobless claims will be reported at 8:30 a.m. and the index of consumer expectations from the University of Michigan consumer sentiment report at 9:55 a.m., both on Thursday.

Traders also keep track of these financial leading indicators: The M2 money supply, out Thursday at 4:30 p.m. from the Federal Reserve, and two reported continually during market hours: The S&P 500 index and the interest rate spread between 10-year Treasuries and the federal funds rate.

I also like to keep an eye on the Baltic dry index of world shipping, updated daily.

Other reports of interest:

Tuesday: International trade at 8:30 a.m.

Wednesday: Import and export prices at 8:30 a.m.; petroleum inventories at 10:30 a.m.


In addition to the FOMC announcement, Federal Reserve Gov. Sarah Bloom Raskin, a member of the monetary policy committee, will give a speech at 1:45 p.m. Thursday.

This is unusual. Normally, Fedsters are on silent running in FOMC announcement weeks. But Gov. Raskin is breaking with custom to discuss links between civic engagement and employment.

And Atlanta Fed Pres. Dennis Lockhart, also an FOMC member, speaks  Friday at 1 p.m. about employment and the recession.

Trading calendar

By my rules, as of Monday I can trade October vertical and butterfly spreads, iron condors and the short legs of calendar and diagonal spreads, as well as December single options and straddles. Of course, shares are good at any time.

Good trading!

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