Sunday, August 11, 2013

The Week Ahead: Inflation? Deflation?

Reporting this week is lead by two inflation reports and statistics for retail sales, industrial production and housing starts.

The producer price index will be released Wednesday at 8:30 a.m. New York time, followed by the consumer price index on Thursday at the same time. The producer figure focuses on costs at the back end of the trail that brings products to market, and the consumer stats on the final stage.

Inflation plays a key role in the current debate over fiscal policy. One side fears the Federal Reserve economic stimulus programs will lead to runaway inflation, perhaps like that of the 1970s. The other fears disinflation -- falling prices that eliminate incentives to buy -- poses the greater risk.

These reports will ultimately provide the answer.

The other majors, although of lesser importance, also deserve a look.

Retail sales is out Tuesday at 8:30 a.m., industrial production Thursday at 9:15 a.m. and housing starts Friday 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.

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

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

Other reports of interest:

Monday: The Treasury budget, including the latest deficit figures, at 2 p.m.

Tuesday: Import and export prices at 8:30 a.m. and business inventories at 10 a.m.

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

Thursday: The Empire State manufacturing survey of business conditions in New York at 8:30 a.m., the Treasury international capital report at 9 a.m., and the Home Builders' housing market index and the Philadelphia Fed survey, both at 10 a.m.

Friday: Productivity and costs at 8:30 a.m.


One member of the Federal Open Market Committee has announced a speaking engagement: St. Louis Fed Pres. James Bullard, on Wednesday.

Analytical universe

This week I'll be analyzing new bull and bear signals among 2,325 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 September options for the short legs of covered calls and vertical and diagonal spreads, calendar and butterfly spreads, and iron condors, and November options for single calls and puts. Of course, shares are good at any time.

Good trading!

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