The Conobot's Take On Next Week's Wall Street Farce
Job one for the US Treasury and its Primary Dealer enforcers is to keep yields low during weeks when the Treasury has a big load of notes and bonds to sell. Next week is one of those weeks, so the casino owners and managers will do what they can to gin up reasons for the Treasury market to stay strong. That usually means they'll try to shake cash out of the stock market tree.
One of the biggest games in the Wall Street weekly farce of separating customers from their money is the game of Beat the Number. They play it with earnings and with conomic expectations. Several Wall Street media PR firms survey the Street conomists about their consensual sexpectations for the conomic data releases for the week ahead. To play along, I have invented the Adlerconobot to assist in the parallel game of Guess the Miss. A positive miss is called a "beat," while a negative miss is just a miss.
Here's the schedule of major releases for the week ahead with the Adlerconobot's miss forecast. Feel free to play along. However, I must warn you, the real key to winning the game is not guessing whether it's a beat or a miss, or by how much. The real key is guessing how the market will react. If you guess right, you win. If you guess wrong. Sorry. Better luck next week.
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Look for the conomic releases to be weaker than conomists' consensual sexpectations. If the numbers are really horrific that would be bullish, because really really weak is really really good. It means that Ben will print, and that means stocks will go up. But next week's numbers won't be horrific. They'll miss but they'll be so-so, not enough to scare anybody. That will leave traders confused. Sorry. Bearish for stocks.
First out at 9:00 AM Tuesday will be the housing Case Chiller. The consensus on that is for a year to year decline of -3.4%. My guess is that it should be -2.1% based on the Case Chiller's ridiculous methodology. House prices are actually now up about 2.5% year to year. It will take another 4 months before the worthless, super lagged Case Chiller catches up with that fact.
At 10 AM Tuesday we'll get the Con Board's Con Con index. Worthless. If the survey was taken during weeks when the Dow was down, it will disappoint. If the market was up during those weeks, the number will beat the consensual, which is for a 69.5 reading. That's down slightly from 70.2 last month. The market was weakening from new highs during the survey period, which ends on the 18th of the month. I don't know if the consensual guess is weak enough, and even if it misses, I'm not sure how the market would react. In any case, the Con Con reaction is usually a kneejerk that's quickly reversed. So unless you are an HFT bot, you can ignore this one.
Also on Tuesday at 10 AM will be the Conmerce Department's new home sales data. The consensual on that is 320,000, seasonally fudge packed. Based on the Adlerconobot's double secret Al Gore rhythm, I suspect that that number will come in light, perhaps around 300,000, but truthfully, your guess is as good as mine, and certainly better than Wall Street conomists.
Then on Wednesday, Durable Goods data is out at 8:30, with a consensual of -1.5%. The Adlerconobot says -2.5%. Then we get the FOMC announcement at 12:30, and Dr. Ben's Feelgood About Me Dog and Pony Circus at 2:15. Read my lips. "The conomy is recovering so no new printing, but we will stand by the pump stations just in case this mother of a bubble suddenly deflates again." The announcement and dog and pony should disappoint and stocks should sell off while Treasuries rally just in time for the last auction of the week, the 7 Year Note.
The closing time for bids on the auctions isn't until 1 PM Thursday. My guess would be that weekly jobless claims at 8:30 AM and the NAR's pending home sales for March at 10 AM are also likely to disappoint. Jobless claims have started trending up a bit in the past 2 weeks. The consensus number is 373,000. The Adler conobot spits out 399,000, which would be worse than the market expects. That's also supported by a plunge in withholding taxes over the week covered by that data.
On Friday, after the auctions are safely out of the way, we get first quarter GDP at 8:30 along with the GDP chain deflator and the Employment Cost Index (ECI), which is a very slow, lagging, quarterly indicator of labor cost inflation. The GDP consensus is 2.6%. I won't bother tackling the GDP. I don't track it.
The ECI consensus is for a 0.5% increase. The BLS publishes monthly data on weekly wages and salaries. It was up .75% on average for the first quarter versus Q4 of 2011. If the ECI comes in lower than that it will be a sign that Dr. Bernankenstein and friends have no clue that labor costs are rising faster than their inflation target, or at least they are pretending that they have no clue. If the ECI does come closer to .75%, Treasuries will get pounded (and gold may finally get out of the starting blocks), but since the auctions are finished on Thursday, it won't matter.
The Michigan Con final number for April comes out at 10 AM Friday. Like the Con Board Con Con earlier in the week, it's a meaningless, dog chasing tail indicator. They're looking for 75.7 on that one, which is a little lower than last month. Because stocks have been lower this month, that one is a tossup. The preliminary number was released earlier in the month, so this will be another non issue unless it's a huge miss, which is unlikely.
As you play the game there are two things to keep in mind. Your guess is as good as mine, and better than theirs. And the consensual sextimate is always wrong. So why are the conomists paid so much? "Marketing and distribution baby!" screamed Dick Vitale. Marketing and distribution.
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