The week ahead - looks like a yawner

by Wayne Ferbert on August 14th, 2012

It is already Tuesday – but we all know nothing important ever gets announced on a Monday. The week ahead is not a very interesting one on the Economic Indicator front. There were no important economic indicators announced on Monday. One could almost say there will be no important economic indicators announced all week, quite frankly. But we do have options expiration on Friday!

If you look at the calendar on the NY Fed web site (check it out here), you can see that this week is a bit of a yawner on economic indicators. We will have a few inflation indicators (CPI & PPI), Business Inventories, New Residential Construction numbers, Philly Fed Survey, and the Michigan Consumer Sentiment. We also will have the ever-present weekly jobless claims numbers. None of these is expected to move the market.

Inflation is expected to be under control as the Fed has been given credit for policies that work on that front. Business inventories will have to show a dramatic change to elicit anything other than a yawn. The Michigan Consumer sentiment is always interesting – but it is considered a ‘soft’ reading on the market since it measures sentiment.

It is possible that two of the announcements this week could impact the market. The New residential construction numbers could elicit a hopeful response on a housing recovery. These numbers have already surprised to the upside this year. But every rally on these numbers in the past year was short lived. The Philly Fed survey could move the markets if it surprises – but the change from month to month in this survey is usually muted.

So, all in all, this should be a quiet week – except for options expiration. (I know – forecasting a quiet week is the kiss of death!) The market has had a nice little run this month since the last options expiration.

The S&P500 was at 1365 on July 20th and here it is at around 1410 this week at options expiration. If you listened to our recommendations and set your covered calls at around $141 on SPY, then you will be sweating out the rest of the week like us. It would be nice if the rest of the week would be flat and the August calls would expire worthless.

It is August and the news cycle is slow – and earnings season is mostly over. So, a stock market jump this week seems unlikely. But a sharp decline seems unlikely also. Just watch the calls closely and be ready to roll any ITM calls on Thursday or Friday – so you don’t have your underlying ETF called away from you.

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