Sunday, November 19, 2006

Weekly Look Ahead

The upcoming week should be slow trading but interesting.

About a three weeks ago I started worrying that we were near a market top and even sold covered calls on my broad market index ETFs (which is where I keep most of my money not in the Finance Wonk Buy stocks). Last friday that call worked out and the calls expired out of the money -- leading to a nice profit on my call that the top was near.

This week should have extremely low trading activity. Earnings season is mostly over, which historically suggests a fallow market, and Thursday there will be no trading due to the US Thanksgiving holiday.

This week will probably be all about friday, so called "Black Friday" because the tremendous shopping day right after Thanksgiving is typically the day many retailers finally move into the Black and generate profits for the year. Black Friday will also have an early trading close so there are only really 3.5 trading days this week.

Friday will see preliminary retail data coming out from retail watchers who camp out and observe the shopping rush. I just came back from a trip to the mall and, while I did observe people buying big screen TVs and other things, the average transaction size appeared within normal. I would estimate this years holiday sales will be up year-over-year, but not stunning.

On the longer term, allow me to bring in a quote:

"The Street has a very short memory, and there's a tremendous bullish bias,
but bonds have been telling the opposite story," said Gary Shilling, president
of A. Gary Shilling & Co., an investment research firm in Springfield, New
Jersey.

"Bonds are telling you: 'Not only is the Fed through with raising
rates, but we've probably got economic weakness.' My suspicion is that bonds
have it right," Shilling added. "Yes, interest rates are going down, but the
damage to profits more than offsets that."

Other economic news this week includes the index of leading U.S. economic indicators for October on Monday and the weekly mortgage market index on Wednesday.
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