Sunday, December 16, 2012

The Week Ahead: Housing, Witches and the End of the World

Housing dominates the economic reporting this week before Christmas, with a scattering of reports tracking other areas to add sauce to the mix.

Housing starts, out Wednesday at 8;30 a.m. Eastern, is a leading indicator for the real-estate sector. A housing start is when the shovel first bites dirt. Other housing reports are existing home sales on Thursday at 10 a.m.

There are also a pair of lower impact housing reports. Earlier in the week, look for the Homebuilders housing market index at 10 a.m. Tuesday, and later in the week, the FHFA house price index on Thursday at 10 a.m.

Other major reports: A final revision of the 3rd quarter gross domestic product on Thursday at 8:30 a.m., followed by the Philadelphia Federal Reserve Bank's survey of the business outlook in the mid-Atlantic region at 10 a.m.

On Friday, durable goods orders and personal income and outlays will both be released at 8:30 a.m.

Of high importance to many traders: Friday is the last day to trade the December options, which expire on Saturday. Friday, in fact, is a quadruple witching day, the last trading day before stock index futures and options, stock options and single-stock futures expire.

Shakespeare got by with only three witches. The markets need four, which no doubt says something profound about the way our world works.

Oh, and I almost forgot. Friday is also the end of the world, as the Mayan calendar ends the Long Count that began 5,125 years ago. I suppose that would mean the expiration of all options, even the Januaries and Februaries. Even the LEAPS.

Leading indicators out this week (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, moved to Friday 4:30 p.m. because of the holiday, from the Federal Reserve.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims, at 8:30 a.m. Thursday.

Building permits for new private homes, from the housing starts report at 8:30 a.m. Wednesday.

University of Michigan/Reuters index of consumer expectations on Friday at 9:55 a.m.

The Conference Board index of leading indicators, which aggregates all of individual leading indicators into a single index, will be released Thursday at 10 a.m. It is not itself considered to be a leading indicator, and has a low potential for moving markets, but there are those of us who love it.

Other reports of interest:

Monday: Empire State manufacturing survey of business conditions in New York, 8:30 a.m., and the Treasury Department international capital report, tracking foreign capital movements into and out of the U.S. economy, at 9 a.m.

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

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


Richmond Fed Pres. Jeffrey Lacker, a member of the Federal Open Market Committee, speaks Monday at 12:30 p.m.

Trading calendar

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

Good trading!

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