Sunday, October 7, 2012

The Week Ahead: Global trade, producer prices

Monday Monday, can't trust that day,
Monday Monday, sometimes it just turns out that way
Oh Monday morning, you gave me no warning of what was to be
Oh Monday Monday, how could you leave and not take me.

And of all of the Mondays The Mamas and the Papas could have described back in 1966, this verse applies best of all to Columbus Day, the Monday of the week ahead. For on Columbus Day, the banks and bond markets have left and not taken stocks with them. Banks and bonds are closed in the United States. The stock markets, however, are open.

Which is a disruptive combination. How can anyone trade stocks without knowing what the bond markets are up to? And besides, it's a day in honor of someone who was described in this way by a 20-something at a neighboring table, over breakfast this morning at the New Deal Cafe: "He was not a good man. I'm not going to celebrate."

So on Tuesday, the real week begins, leading up to two major econ reports. International Trade on Thursday at 8:30 a.m. Eastern tells how much more we're buying from China than China is buying from us (and other countries as well, of course). The producer price index at 8:30 a.m. tells about inflation in the making of things, as opposed to the consumer price index released the week after, which tracks inflation for the rest of us, as consumers.

And in the campaign to elect the next president, surely a leading indicator if ever one there was, we have the Joe Biden/Paul Ryan vice-presidential smackdown, on Thursday at 9 p.m.  Given the fact that fiscal policy and proper scope of government stand behind the Republican candidate Ryan's claim to fame, I would expect those topics, key to long-term market performance, to play an important role in the debate.

Leading indicators out this week:

Average weekly initial jobless claims will be reported at 8:30 a.m. Thursday.

The index of consumer expectations from the Reuters/University of Michigan consumer sentiment report, Friday at 9:55 a.m.

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:

Wednesday: The Federal Reserve banks' Beige Book, a survey of conditions in each Fed District, and the Treasury budget, which tracks the Federal government's budget deficit, both out at 2 p.m.

Thursday: Import and export prices at 8:30 a.m. and petroleum inventories at 11 a.m.

Trading calendar

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

Good trading!

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