The television “talking heads” are all over the map in their discussions as to what the coming week holds for our economy. The usual discussions concerning the job market (improving), federal budget (weakening), and consumer sentiment (improving) have dominated the prognosticators predictions.
Here is a synopsis of what to expect for next week:
| DATE | REPORT | CONSENSUS | PREVIOUS |
| Dec. 5 | ISM Services | 53.9% | 52.9% |
| Dec. 5 | Factory Orders | -0.3% | 0.3% |
| Dec. 8 | Jobless Claims | 395,000 | 402,000 |
| Dec. 9 | Trade Balance | -$42.2 B | -$43.1 B |
| Dec. 9 | Consumer Sentiment | 66.0 | 64.1 |
On the hand, I suspect the market will continue to focus, to some degree, on the evolving debt crisis rippling through the southern tier of countries on the European continent. Yes, I realize the Central Banks, in a concerted effort, have opened the spigot of cheap money for the European banking system, but the systemic problems in the troubled European economies have not changed since last week. I have a hard time believing that the average institutional investor will consider the problem solved. To be sure, I don’t think anyone who is seriously involved with the European economic woes sees the latest round of “cheap money” as anything more than a band-aid on an ever deepening problem.
In short, I think that even the short memories of traders will completely dismiss the European situation. Then again, I never underestimate the neurosis of the trading community.
On the domestic front, I think the number to watch might well be the ubiquitous trade balance number. According to John Lonski, chief economist at Moody’s Analytic’s capital markets, “The positive is the trade gap has been narrowing, but make no doubt about it, one of the reasons we have lost so many manufacturing jobs is because of the heightened competition from overseas.”
From January to September, the U.S. imported $552 billion more worth of goods than it exported, with roughly 40% of that gap coming from China; and the imbalance has long been a source of tension between the two countries.
Anyone who has spent any amount of time in the trade room has been forced to listen to my rants about China’s monetary policy and failure to let their currency float, like the rest of the world’s major economic powers. They have consistently used their “non-floating” currency position to their advantage, and put an awful lot of money in their treasury. Falling interest rates and troubled economies have now made their economic policy the catalyst for major losses in their currency trading. I, for one, won’t be shedding a tear for them.
Finally, the market has been very reactive to the news, and it is difficult to predict what sort of new economic issues may rear their head. I would count on the unexpected, as the world is currently in a state of flux.
Real Live Trading Doesn’t Lie. Spend 3 days with me, a long time institutional investor, in my trading room, and see if you are one of the many that can profit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here.
