Sunday, June 19, 2016

The Week Ahead: Brexit, Yellen, Homes, Durables

The biggest potential market-mover of the week is the Brexit vote on Thursday that will determine whether the United Kingdom will leave the European Union or remain part of the confederation. The polls close at 10 p.m. in the United Kingdom, or 6 p.m. New York time.

Prior to that vote, Fed Chair Janet Yellen gives her semi-annual testimony before each chamber of Congress in which she discusses the state of the economy and monetary policy. She appears before the Senate Committee on Banking, Housing and Urban Affairs on Tuesday and the House Committee on Financial Services on Wednesday, with each beginning at 10 a.m. New York time.

Otherwise, two major economic reports mark a week characterized by a lack of much in the way of data releases.

Existing home sales will be published on Wednesday and new home sales on Thursday, each at 10 a.m.

Durable goods orders will be released 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. Thursday.

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

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

The index of consumer expectations from the Reuters/University of Michigan consumer sentiment survey at 10 a.m. Friday.

Although the index of leading indicators is not in itself a leading indicator, it is a compilation of leaders and so provides a nice "You Are Here" overview of the business cycle. This is one place to look if the economy is turning toward recession. It will be published on Thursday at 10 a.m.

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Events arranged by day:

Tuesday: Fed Chair Yellen testifies before a Senate committee at 10 a.m.

Wednesday:  Fed Chair Yellen testifies before a House committee and existing home sales, each at 10 a.m., and petroleum inventories at 10:30 a.m.

Thursday: Jobless claims at 8:30 a.m., the purchasing managers manufacturing index flash report at 9:45 a.m., new home sales and the index of leading indicators, each at 10 a.m.., the M2 money supply at 4:30 p.m. and polls close in the U.K. at 6 p.m. New York time, ending the Brexit vote.

Friday: Durable goods orders at 8:30 a.m. and consumer sentiment at 10 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 1.44%, down seven basis points 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., settlement Thursday.
  • 6-month: Auction Monday 11:30 a.m., announcement Thursday 11 a.m., settlement Thursday.
  • 52-week: Auction Tuesday 11:30 a.m., settlement Thursday.
  • 2-year: Auction Monday 1 p.m.
  • 2-year floating rate: Auction Wednesday 11:30 a.m.
  • 5-year: Auction Tuesday 1 p.m.
  • 7-year: Auction Wednesday 1 p.m.
  • None.
  • 30-year: Anuction Thursday 1 p.m.

Fed Yellen's testimony before Congress on Tuesday and Wednesday dominates the Fed glitterati's public face this week.

Adding to the flow of policy hints from key players, Fed Gov. Jerome Powell gives introductory remarks at the roundtable of Interim Report of Alternative Reference Rates Committee in New York on Tuesday at 2:30 p.m.

In addition to the two Federal Open Market Committee members, two FOMC alternates will make public appearances: Minneapolis Fed Pres. Neel Kashkari on Monday and Dallas Fed Pres. Robert Kaplan on Thursday.

Analytical universe

This week I shall be analyzing new trading signals from among 461 large-cap stocks and exchange-traded funds.


It is now the scientific consensus that our risk-avoidance mechanism is not mediated by the cognitive modules of our brain, but rather by the emotional ones. This may have made us fit for the Pleistocene era. Our risk machinery is designed to run away from tigers; it is not designed for the information-laden modern world.
--Nassim Nicholas Taleb (2004)

Good trading!

-- Tim Bovee, Portland, Oregon, June 19, 2016


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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