Sunday, October 13, 2013

The Week Ahead: Industry, shutdown, default, fake holiday

Inflation, housing and industry might lead the week's economic reporting, or might not, as the federal government goes into a third week of being closed because House Republicans have refused to fund it. Two of the three major reports won't be issued if the government shutdown continues.

The overwhelming influence on the course of trading, however, will without a doubt come from attempts by Congress and the White House to strike a deal that avoids a default on the national debt. Treasury says Oct. 17 is the deadline, after which it won't have the cash on hand to pay all of the federal government's bills.

Adding to the weirdness, the week begins with one of those fake holidays that dot the American calendar. Monday is Columbus Day. Bond markets will be closed. Stock markets will be open. Bonds and stocks go together, like love and marriage or a horse and a carriage. Separating them -- not a good idea, really.

That no doubt is why there are no economic releases scheduled for Monday. Fed Chairman Ben Bernanke, however, ignoring the Federal Reserve holiday, will at 9 p.m. New York time address a conference in Mexico City sponsored by the Bank of Mexico.

The Federal Reserve, which has funding independent of Congressional appropriations, will report on industrial production on Thursday at 9:15 a.m.

The two doubtful reports produced by shuttered agencies are the consumer price index, scheduled for 8:30 a.m. on Wednesday, and housing starts, scheduled for 8:30 a.m. on Thursday.

A fourth report considered important to trading is the Philadelphia Federal Reserve survey of market conditions in the mid-Atlantic region, out at 10 a.m. on Thursday.

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 Labor Dept. has been releasing this report despite the government shutdown.

Building permits for new private homes from housing starts is scheduled for 8:30 a.m. Thursday but probably will be cancelled because of the shutdown.

The index of leading indicators, compiled by the Conference Board, is itself a trailing indicator, but I find it to be a useful "You Are Here" marker for the course of the economy. This month's compilation, of course, will be based on incomplete data because of the government shutdown. The report is due out on Friday at 10 a.m., and there is no indication on the Conference Board website that it will be delayed.

Other reports of interest:

Tuesday: The Empire State manufacturing survey of conditions in New York, at 8:30 a.m.

Wednesday: The Home  Builders' housing market index at 10 a.m. and the Federal Reserve's Beige Book report on economic conditions in each of its districts at 2 p.m.

Possibly cancelled by the shutdown: Treasury international capital report on Wednesday at 9 a.m. and petroleum inventories on Thursday at 11:00 a.m.


Bernanke aside, five Federal Open Market Committee members have scheduled appearances: New York Fed Pres. William Dudley on Tuesday, Chicago Fed Pres. Charles Evans on Thursday and Friday, Kansas City Fed Pres. Esther George on Thursday and Fed Govs. Daniel Tarullo and Jeremy Stein on Friday.

Two FOMC alternates are scheduled to speak, Dallas Fed Pres. Richard Fisher on Tuesday, Wednesday and Thursday and Minneapolis Fed Pres. Narayana Kocherlakota on Thursday

Analytical universe

This week I shall be analyzing new bull and bear signals among 2,356 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 November options for the short legs of vertical, diagonal and calendar spreads and covered calls, and for all legs of butterfly spreads and iron condors. I'm trading January options for single calls and puts as well as straddles. Shares, of course, are good at any time.

Good trading!

No comments:

Post a Comment