Sunday, December 13, 2015

The Week Ahead: The Fed's big week, inflation, housing, industry

Is this the week? Really? Pinky promise?

Money policy makers complete a two-day meeting on Wednesday, two weeks after the Federal Reserve sent strong signals that the long-awaited moment of tightening was at hand. There had, of course, been signals aplenty prior to the last two meetings, but nothing happened

This week's is the last  of the year's four meetings followed by the release of economic projections and a news conference, so there will be plenty of information for the markets to absorb.

The Federal Open Market Committee schedule: Statement and economic projections at 2 p.m. New York time, and Fed Chair Janet Yellen's news conference at 2:30 p.m.

Given the conventional wisdom's certainty that the FOMC will raise the Federal Funds Rate, the potential market impact lies mainly in the question, By how much? Traditionally, the Fed has begun with a 0.25% increase. Since the rate has been held so low since the onset of the financial crisis, that's a doubling of the rate. Some are predicting a 0.5% increase, a tripling of the rate.

Several major economic reports will also be dropped into the stew: The consumer price index on Tuesday and housing starts on Wednesday, each at 8:30 a.m., and industrial production on Wednesday at 9:15 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 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.

Building permits for new private homes from housing starts on Wednesday at 8:30 a.m.

Events arranged by day:

Tuesday: Consumer price index and  the Empire State manufacturing survey of conditions in New York, each at 8:30 a.m., and the Treasury's international capital report at 4 p.m.

Wednesday:  Housing starts at 8:30 a.m., industrial production at 9:15 a.m., the PMI manufacturing index flash report at 9:45 a.m., petroleum inventories at 10:30 a.m., FOMC announcement at 2 p.m. and Fed Chair Yellen news conference at 2:30 p.m.

ThursdayJobless claims and the Philadelphia Fed business outlook survey of conditions in the mid-Atlantic region, each at 8:30 a.m., and the M2 money supply at 4:30 p.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 1.23%, down 0.15% 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.
  • 3-year: Settlement Tuesday.
  • 10-year: Settlement Tuesday.
  • 30-year: Settlement Tuesday.
  • 5-year: Auction Thursday 1 p.m.

The Fed glitterati by tradition stay silent in weeks when the FOMC meets, allowing the money policy statement to speak for itself.

Aside from Yellen and her news conference, one FOMC member, Richmond Fed Gov. Jeffrey Lacker, has scheduled an appearance, on Friday.

Analytical universe

This week I shall be analyzing new trading signals from among 480 large-cap stocks and exchange-traded funds.

Good trading!

-- Tim Bovee, Portland, Oregon, Dec. 13, 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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