Background on “Weighing the Week Ahead”
There are many good lists of upcoming events. One source I regularly follow is the weekly calendar from Investing.com. For best results you need to select the date range from the calendar displayed on the site. You will be rewarded with a comprehensive list of data and events from all over the world. It takes a little practice, but it is worth it.
In contrast, I highlight a smaller group of events. My theme is an expert guess about what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios. Each week I consider the upcoming calendar and the current market, predicting the main theme we should expect. This step is an important part of my trading preparation and planning. It takes more hours than you can imagine.
My record is pretty good. If you review the list of titles it looks like a history of market concerns. Wrong! The thing to note is that I highlighted each topic the week before it grabbed the attention. I find it useful to reflect on the key theme for the week ahead, and I hope you will as well.
This is unlike my other articles at “A Dash” where I develop a focused, logical argument with supporting data on a single theme. Here I am simply sharing my conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am putting the news in context.
Readers often disagree with my conclusions. Do not be bashful. Join in and comment about what we should expect in the days ahead. This weekly piece emphasizes my opinions about what is really important and how to put the news in context. I have had great success with my approach, but feel free to disagree. That is what makes a market!
Last Week’s Data
Each week I break down events into good and bad. Often there is “ugly” and on rare occasion something really good. My working definition of “good” has two components:
- The news is market-friendly. Our personal policy preferences are not relevant for this test. And especially — no politics.
- It is better than expectations.
The Good
There was some good news in a decidedly mixed week.
- Microsoft led a market rebound. The witty Eddy Elfenbein notes that if your stock gains $24 B when you quit, you probably did the right thing! (Has MSFT escaped from the “value trap” status? There are many other stocks in the same category. [long MSFT stock versus SEP 34 calls]
- Chinese manufacturing is growing (via NYT). The HSBC flash index showed an upside surprise. This “official” results are usually higher.
- Copper is showing strength — including reduced inventories and Chinese demand. The Financial Post notes as follows:
“The most significant growth in demand, however, is coming from China, the world’s largest consumer of commodities. Chinese officials revealed this week that net imports reached 272,390 tonnes in July, up 5.3% from June and 12.6% year-over-year.”
- Jobless claims are holding at a lower level. The weekly series moved higher, but not dramatically given the seasonal fluctuation. This seems to be a new and lower level of job losses. Now we need to see more job creation.
- Jackson Hole commentary was dovish. In Bernanke’s absence, interviews with others got extra publicity. Readers know that I believe this all to be exaggerated, but it did seem to have a calming effect at week’s end.
- Existing home sales were solid. The problem is that these are closed contracts, not indicative of the recent rise in mortgage prices. The real key is inventory. Calculated Risk is the best source for interpreting the data and making sense of the apparent cross-currents. Think inventory! Bill’s chart shows the overall improvement, but see the article and read his links for the full story.
The Bad
There was a fair share of bad news.
- The Fed Minutes. I am scoring this as “bad” because the market went down a little after some wild gyrations. The DJIA was down less than 1% and it had done half of that before the FOMC report. The decline, spike back to unchanged, and selling to the lows seemed to provide credibility to a bearish spin. My personal viewpoint was that there was nothing new. Josh Brown highlights a good source who thinks the statement was dovish. The market did not agree.
- Retail earnings had another bad week. There is some variation by brand, but apparel seems especially weak.
- New home sales disappointed. Calculated Risk sees this as a (temporary) reaction to higher mortgage rates. The overall growth of new homes (as opposed to existing sales) should continue. Check out the charts and analysis. Meanwhile, the market is taking this at face value.
- The NASDAQ flash freeze. In a real sense, this had little effect. Do people really need constant access to markets? Regardless of the answer to that question, the story provided another reason to suggest that investors should not have confidence in financial institutions.
- Economic progress continues to disappoint. Research shows that Household Income has still not recovered from the recession. Doug Short does a great job of reviewing the recent data from Sentier Research. Read his posts here and here, including this chart:
Whatever progress has been made, it has not been enough.
