Saturday, July 6, 2013

The Week Ahead: Fed clues

The first installment of price data, Federal Open Market Committee minutes and a speech on history by Chairman Ben Bernanke punctuate the week in econ reporting.

The producer price index will be published at 8:30 a.m. New York time, an overture to the full opera, the consumer price index, to be released Tuesday of next week. I expect a heightened sensitivity to prices, as there has been for jobs, as traders try to divine when the Fed will yank away the punchbowl of growing prosperity out of fear of the sour lemons of looming inflation.

Another clue to the Fed's hive mind will come Wednesday at 2 p.m., when the FOMC releases minutes of its June 19 meeting. That was the day Bernanke gave a measured, post-meeting news conference saying that the FOMC might, just might, conditions permitting, let up slightly on the monetary gas pedal, without even thinking of tapping the breaks.

Traders, of course, reacted as thought Bernanke had shrieked "Inflation" thrice and then jammed the brake pedal to the floor, causing a spin-out over the cliff at the side of the road.

The markets, I've come to realize, are not always rational.

Speaking of the chairman, Bernanke gives a speech at 4:10 p.m. Wednesday with the grand title, "A Century of U.S. Central Banking: Goals, Frameworks, Accountability". Could there be clues in that speech, to the National Bureau of Economic Research conference, regarding the Fed's future course?

He's talking about Fed history, Fed history included the Great Depression, we're coming out of the Great Recession, and so by the process of analogy, a built-in penchant of our species, I suspect there may be a clue or two to be found, at least in the mind of the clue-seeker.

The National Bureau of Economic Research, by the way, is best known to the public for being the quasi-official arbiters of the business cycle, determining its peaks and troughs, which puts its mission squarely in the middle of the Fed-watchers' playing field.

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.

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

Other reports of interest:

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

Thursday: Import and export prices at 8:30 a.m., and the Treasury budget, showing the federal deficit, at 2 p.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.


Besides Bernanke, two Federal Open Market Committee members will make public appearances: Fed Gov. Daniel Tarullo on Thursday and St. Louis Fed Pres. James Bullard on Friday. San Francisco Fed Pres. John Williams, who isn't sitting on the FOMC this year, also speaks on Friday.

Analytical universe

This week I'll be analyzing new bull and bear signals among 2,302 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 August options for the short legs of vertical, diagonal and butterfly  spreads, iron condors and covered calls as well as October options for single calls and puts. Of course, shares are good at any time.

Posting schedule

Beginning Thursday, I'll be traveling in East Asia for several weeks, and during that period I'll adjust my posting schedule to conform to local time. Analyses of individual stocks and my daily prospects list will be posted after the markets close in New York and sometimes deep in the night U.S. time. I won't post on travel days.

Good trading!

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