Sunday, April 14, 2013

The Week Ahead: Inflation, Housing, Industry

Inflation, housing and industry dominate the week in economic reporting, with all but one of the major reports being published on Tuesday. Of consuming interest for speculators, Friday is last trading day for April options, which expire on Saturday.

The consumer price index and housing starts lead the parade at 8:30 a.m. Eastern, followed by industrial production at 9:15 a.m.

Inflation has been quite low for years under the impact of recession, despite the best efforts of monetary policy to counter the risk of deflation. An uptick in inflation would be a sign that the recovery is truly taking hold, and it would also prompt a flurry of news stories speculating on how long it will be before the Federal Reserve clamps down on economic growth.

Housing starts are a major forecast of future activity in building and real estate, major drivers of jobs that have impacts that cascade throughout the economy.

Industrial production -- It is said that we live in a post-industrial era, but industry still counts. It has an outsized impact on economic performance. Another major industrial report, the Philadelphia Federal Reserve survey, out Thursday at 10 a.m., tracks manufacturing in the mid-Atlantic region and serves as an avatar for national conditions.

Leading indicators (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, at 4:30 p.m. Thursday.

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. Tuesday.

The Conference Board index of leading indicators will be published at 10 a.m. Thursday. Although not in itself a leading indicator, it is built from the individual leading indicators I track in this section of "Week Ahead". I think it provides a fine overview of where we stand in the economic cycle.

Other reports of interest:

Monday: Empire State manufacturing survey at 8:30 a.m., Treasury international capital at 9 a.m. and the Home Builders' housing market index at 10 a.m.

Wednesday: Petroleum inventories at 10:30 a.m. and the Federal Reserve's Beige Book survey of conditions in each of the Fed's regions.

I also follow the Baltic dry index, released daily, tracking the volume of global maritime shipments of coal, iron ore, grain and other raw materials.


Six Federal Open Market Committee members have scheduled public appearances: Fed Vice Chair Janet Yellen and Fed Gov. Elizabeth Duke on Tuesday, Fed Gov. Jeremy Stein, St. Louis Fed Pres. James Bullard and Boston Fed Pres. Eric Rosengren on Wednesday, and Fed Gov. Sarah Bloom Raskin on Thursday.

Minneapolis Fed Pres. Narayana Kocherlakota, an FOMC alternate, speaks twice, on Tuesday and Thursday.

Analytical universe

This week I'll be analyzing new bull and bear signals among 2,228 stocks and exchange-traded funds that have a better-than-even chance of profit following breakouts in at least one direction from the 20-day price channel under the Turtle Trading rules.

The stocks are drawn from 9,212 symbols traded on the major U.S. exchanges. The probability of profit is calculated from Jan. 2, 2009, about the time that the broad markets began recovering from the post-recession crash.

Trading calendar

By my rules, I'm trading May options for short vertical  and butterfly spreads, iron condors and the short legs of covered calls and diagonals as well as July options for single calls and puts. Of course, shares are good at any time.

Good trading!

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