Weighing the Week Ahead: Is the Coast Clear?

The economic calendar is very light, and it is a holiday-shortened week. With the quadrennial CNBC switch to Olympic curling coverage after the market close, there is a little less air time to fill. What time and space remains will invite pundit opinion about last week’s stock rebound and the question:

Is the coast clear?

Last Week Recap

My last edition of WTWA I predicted that inflation would be the key topic of interest and mused about whether it could spark another leg down for stocks. It was indeed a key question during the week and inflation ran a bit hotter than the Fed’s targets. For now at least, the level of inflation is not generating market fear. The effect on the rally lasted for only a few minutes after the CPI announcement.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. I especially like the Doug Short design with Jill Mislinski updates and commentary. You can see many important features in a single look. She includes not only the price changes, but also volume and helpful callouts. The entire post includes a great collection of charts and analytical observations.

The gain for the week included a 5% trading range. Remember all those weeks when the range was only 1%? It was a time of abnormal behavior – a long time. A 5% move is also abnormal. The long-term average for the VIX is 19. In case you missed it last week, I posted What Investors Should Know about VIX.

Personal Note

I will be off next weekend. I will try to post an indicator update, especially if there are important changes. Mrs. OldProf is not joining me, giving her more time to play Words with Friends and enjoy her Valentine’s flowers.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

The economic news was mixed. Once again, the market reaction had little to do with the news flow.