Saturday, June 22, 2013

The Week Ahead: Second-guessing Chairman Ben

Fed Chairman Ben Bernanke tossed a firecracker into the picnic last week with his statement that the Federal Open Market Committee, next year, will begin to moderate its stimulus of the economy. He added an important caveat: "If the incoming data are broadly consistent with this forecast".

Bernanke's caveat heightens the stakes implicit in economic reporting, not just this week but for the rest of the year, and traders will be trying all the harder to view the major reports through a lens ground by the Fed chairman. Second guessing the Fed has always been a favorite game in markets, but there is now far more riding on it.

There are a variety of major reports due out this week for players to kick around the field. 

Durable goods orders, a measure of demand for big-ticket factory items and confidence in longer term economic growth, will be published Tuesday at 8:30 a.m. New York time, followed at 10 a.m. the same day by new home sales, which tracks a different sort of big-ticket item.

The third revision of 1st quarter gross domestic product will be released Wednesday at 8:30 a.m.

Personal income and outlays, which tracks not only what we make and spend but what we save, will come out Thursday at 8:30 a.m.

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.

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

Other reports of interest:

Monday: Dallas Federal Reserve manufacturing survey of activity in Texas at 10:30 a.m.

Tuesday: S&P Case-Shiller home price index of prices within 20 individual metro areas at 9 a.m., and the Conference Board consumer confidence report at 10 a.m.

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

Thursday: Pending home sales index at 10 a.m.

Friday: The Chicago purchasing managers index at 8:45 a.m.

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.


Two members of the Federal Open Market Committee are scheduled to speak: Fed Gov. Jerome Powell on Thursday and Fed Gov. Jeremy Stein on Friday.

Three FOMC alternates will be at podiums: Dallas Fed Pres. Richard Fisher on Monday, Minneapolis Fed Pres. Narayana Kocherlakota on Wednesday and Cleveland Fed Pres. Sandra Pianalto on Friday

And three other Federal Reserve notabili have speeches scheduled: Atlanta Fed Pres. Dennis Lockhart on Thursday and Richmond Fed Pres. Jeffrey Lacker and San Francisco Fed Pres. John Williams on Friday.

Analytical universe

This week I'll be analyzing new bull and bear signals among 2,289 stocks and exchange-traded funds that have some analyst interest. They are traded both on the major U.S. exchanges and over-the-counter. My universe is selected from mid-cap stocks and larger, defined as market capitalization of $1 billion and greater.

Trading calendar

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

Good trading!

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