Saturday, July 13, 2013

The Week Ahead: Prices, housing and the Fed

Consumer prices and housing starts headline the week's economic reporting. They both factor into decisions on the agenda of the Federal Reserve and its chairman, Ben Bernanke, who makes his semi-annual pilgrimage this week to testify before committees of each house of Congress, concurrent with the release with the Fed Beige Book describing economic conditions in each of its regions.

Consumer prices will be published on Tuesday at 8:30 a.m. New York time. This is the measure of inflation or deflation. Inflation: Feds decelerate stimulus. Deflation: Feds accelerate stimulus. Monetary policy is so easy.

The sector that, it is said, leads economic recoveries is housing, and a key measure of the sector, housing starts, will be released at 8:30 a.m. on Wednesday. A housing start today means construction jobs and ultimately a bump up in sales of beds, sheets, towels and refrigerators.

Bernanke testifies first on Wednesday at 10 a.m. before the House Financial Services Committee. The Beige Book will be released at 2 p.m. the same day. His second round of testimony and questioning comes Thursday at 10:30 a.m. before the Senate Committee on Banking, Housing and Urban Affairs.

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 housing starts, at 8:30 a.m. Wednesday.

The index of leading indicators at 10 a.m. Thursday. While it is itself a trailing indicator, the index aggregates the leading indicators and so gives a convenient one-number way to track them.

Other reports of interest:

Monday: Retail sales and the Fed's Empire State Manufacturing Survey tracking conditions in New York, both at 8:30 a.m., and business inventories at 10 a.m.

Tuesday: Treasury's report on international capital flows at 9 a.m.,  industrial production at 9:15 a.m. and the Home Builders' housing market index at 10 a.m.

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

Thursday: The Philadelphia Fed survey of conditions in the mid-Atlantic region at 10 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.


Besides Bernanke, another Federal Open Market Committee member, Kansas City Fed Pres. Esther George will make a public appearance, on Tuesday.

Analytical universe

This week I'll be analyzing new bull and bear signals among 2,317 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

I am 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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