Sunday, November 29, 2015

The Week Ahead: A speculative stew

The conventional wisdom goes like this: Since beginning to sell the idea that the time for anti-inflationary tightening has come, the Federal Open Market Committee has let pass two opportunities to raise the interest rate under its control.

The Dec. 15-16 meeting is the last opportunity for the Fed to tighten before the 2016 election year begins. Tightening action after December will inevitably be given a political spin. The Fed generally avoids politics like the plague. Therefore, the chances for a December bump up in the Fed Funds Rate seem high.

But what if there are signs of a weakening economy? Such is the stuff of a central banker's nightmares.

The employment situation report, including the headline-making unemployment rate,  will be published Friday at 8:30 a.m. New York time. The numbers will get a sneak preview in the form of the ADP employment report, issued by a private-sector payroll company on Wednesday at 8:15 a.m.

Adding to the bubbling speculative stew will be two public appearances this week by Fed Chair Janet Yellen.
  • A speech to the Economic Club of Washington on the economic outlook on Wednesday at 12:25 p.m.
  • Testimony before the Congressional Joint Economic Committee about the economic outlook on Wednesday at 10 a.m.
Two other potential market-movers are on the agenda this week, although neither has impact rivalling that of the jobs numbers. They are the Institute of Supply Management manufacturing index will be released Tuesday at 10 a.m., and international trade, on 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. Friday.

The average hourly workweek in manufacturing from the employment report on Friday at 8:30 a.m.

Manufacturers' new orders for consumer goods and materials from the factory orders report on Thursday at 10 a.m.

Vendor performance, or the deliveries times index, from the ISM manufacturing survey on Tuesday at 10 a.m.

The S&P 500 index, reported continually during market hours.

Average weekly initial claims for unemployment from the jobless claims report on Wednesday at 8:30 a.m.

Manufacturers' new orders for non-defense capital goods from the factory ordrs report on Thursday at 10 a.m.

Events arranged by day:

Monday: Chicago Purchasing Managers index at 9:45 a.m., pending home sales at 10 a.m. and the Dallas Federal Reserve Bank manufacturing survey at 10:30 a.m.

Tuesday: Motor vehicle sales throughout the day, the Purchasing Managers manufacturing index at 9:45 a.m., and the ISM manufacturing index and construction spending, each at 10 a.m.

Wednesday: ADP employment report at 8:15 a.m., productivity and costs at 8:30 a.m., petroleum inventories at 10:30 a.m. and the Federal Reserve "Beige Book" at 2 p.m.

ThursdayJobless claims 8:30 a.m., factory orders and the ISM non-manufacturing index, each at 10 a.m., and M2 money supply at 4:30 p.m.

Friday:  Employment and international trade at 8:30 a.m.

I also keep an eye on the Baltic Dry Index, updated daily, and the 5-year implied inflation rate based on U.S. Treasury yields, which presently stands at 1.38%, up 0.01% from a week earlier.

Treasury Debt

  • 4-week: Announcement Monday 11 a.m., auction Tuesday 11:30 a.m., settlement Thursday.
  • 3-month: Auction Monday 11:30 a.m., announcement Thursday 11 a.m.
  • 6-month: Auction Monday 11:30 a.m., announcement Thursday 11 a.m.
  • 52-week: Announcement Thursday 11 a.m.
  • 3-year: Announcement Thursday 11 a.m.
  • 10-year: Announcement Thursday 11 a.m.
  • 30-year: Announcement Thursday 11 a.m.
  • None.

In addition to Fed Chair Yellen's two appearances (see above), a flurry of Fedsters are flocking to the podiums during the week.

Fed Gov. Lael Brainard addresses the Stanford Institute for Economic Policy Research Associates Meeting in Stanford, California on Tuesday at 8 p.m. New York time. His topic: Lower neutral rate and its implications for monetary policy.

Fed Vice Chairman Stanley Fischer speaks at the Federal Reserve Bank of Cleveland Financial Stability Conference in Washington at on Thursday at 1:10 p.m. His subject: Financial stability and shadow banks.

Yellen, Brainard and Fischer are members of the Federal Open Market Committee.

Three other FOMC members plan appaerances: Chicago Fed Pres. Charles Evans on Tuesday, Atlanta Fed Pres. Dennis Lockhart and San Francisco Fed Pres. John Williams on Tuesday

Two FOMC alternates will speak: Cleveland Fed Pres. Loretta Mester on Thursday and St. Louis Fed Pres. James Bullard on Friday

Two others from among the Fed glitterati will take to the podium: Philadelphia Fed Pres. Patrick Harker and outgoing Minneapolis Fed Pres. Narayana Kocherlakota on Friday

A Federal Reserve open board meeting will be held in Washington on Monday at 8:30 a.m. to discuss implementation of amendments to the Dodd-Frank Act's emergency lending authority provisions.

Analytical universe

This week I shall be analyzing new bull and bear signals among 495 large-cap stocks and exchange-traded funds.

Good trading!

-- Tim Bovee, Portland, Oregon, Nov. 29, 2015


Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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