The Greek's Week Ahead - Time to Buy!

The Greek's Week Ahead has been engineered to prepare you for the events that could impact your portfolio this week.

The holiday week ahead offers up a shortened period that could prove volatile on light volume. A good portion of the market will be on vacation, sipping eggnog and singing carols, or more likely playing poker and arguing with distant relatives!

The Greek has been vocal on our call to rally as we near the end of the year. I continue to expect a late Santa Claus rally to spread into a full-fledged January effect. A pending recession and bullish stock run can in fact go hand in hand my friends, because seasonal capital flows should find deeply valued beaten down shares now appealing.

401K reshuffling could also play a role in where capital flows, as employees the nation over move capital in a reactionary manner out of losing sectors into winners. For this reason, I expect another early run for emerging market shares boosted by fund flows. In Q4, kitchen-sink write-offs sank shares in lending, investment banking, home building and other industries, and while many of these businesses are not due for imminent recovery, the stocks look cheap in some instances and the market is forward looking.




THE WEEK AHEAD

Monday

Christmas Eve is a trading day my dear friends, however desolate downtown New York will surely be. Whoever does show up for work on Wall Street, or otherwise manages to peruse a portfolio, will likely take off early anyway. Thus, barring any major breaking news surprise, I would expect a light day typical of the pre-holiday type.

Zero economic data is due for release and the earnings calendar is empty as well. However, the New York Stock Exchange will rebalance several indexes, and Barron’s reports that the NYSE U.S. 100 Index will add Transocean (NYSE: RIG), Deere (NYSE: DE), Union Pacific (NYSE: UNP), CME Group (NYSE: CME), Apache (NYSE: APA) and Southern Copper (NYSE: PCU). The index will remove Automatic Data Processing (NYSE: ADP), Cardinal Health (NYSE: CAH), Capital One Financial (NYSE: COF), Fredie Mac (NYSE: FRE), SunTrust Banks (NYSE: STI) and Washington Mutual (NYSE: WM). The trading day before Christmas will be a shortened one, as equity exchanges close at 1 p.m. Interestingly, the Russian Duma holds its first session on Monday. Of course Tuesday marks the Christmas holiday and all markets are closed.

Wednesday

As traders return with full bellies, they will find some important economic data left to digest. Alongside the Redbook Survey, the International Council of Shopping Centers - UBS will report its more closely watched weekly same-store sales data a day later than normal. This week’s report will carry heavy economic message and repercussions for retail stocks and the consumer sector on the whole, since the data covers the week before the gift-giving peak. The year’s sales trends have weakened steadily, and the week just prior offered reported sales growth of only 2.1% year-over-year. The period just after Thanksgiving proved strong, but December has thus far shown weakness. So, a healthy last minute shopping push would not likely play out significantly for December retail sales when reported.

S&P Case-Shiller should indicate further decline in home prices during October. The Bank of Japan is set to release its meeting minutes from October 31 and November 12-13. On the earnings front, the day after Christmas brings an empty stocking.

Thursday

Market participants better be off their leftovers diet by Thursday, because they will be met by a heavy data schedule. Bright and early at 8:30 AM EST, Weekly Initial Jobless Claims should be closely watched and well-covered by the media. Over the last few weeks the number has begun to trend higher. Last week’s measure of 346K was 12,000 more than the week before, and the Fed and most economists agree unemployment is on the rise. Bloomberg’s consensus expects a measure of 343K in this latest reading.

The Greek is specifically looking toward poor consumer spending to drive consolidation in retail, restaurant and other consumer-dependant businesses. The only two earnings reporters on Thursday include a retailer and a restaurant, and so Christopher & Banks (NYSE: CBK) and Luby’s Inc. (NYSE: LUB) carry a heavy burden. The individual reports will likely lead pundits to draw broader conclusions on Thursday.

Strategists have yet to predict the next industry collapse your favorite Greek sees. I believe the next leg lower for this economy will likely be driven by consolidation in the retail/restaurant/consumer sector. As a result, unemployment should rise and a saturated retail environment should become exposed. This in turn should drive a recession in commercial construction.

Also on Thursday morning, Durable Goods Orders for the month of November are expected to have increased 2.5%, according to Reuters (3.0% by Bloomberg’s tally). This is in tune with the prior week released personal consumption growth number, but likely not indicative of what’s to come in December and early ‘08.

Due to the holiday, the Mortgage Bankers Association will post its Purchase Applications Index on Thursday this week. Refinancing activity aided by government and lender efforts to stabilize mortgage streams have generated application activity, despite tighter lending standards and stricter regulatory oversight. Last week’s index measured 422.2.

At 10:00 AM, The Conference Board is due to report its Consumer Confidence Index for December. Friday brought a University of Michigan Sentiment reading of 75.5, which while above expectations fell short of November’s reading. Reuters notes an expectation for a December Conference Board reading of 87.0, versus 87.3 last time around. Bloomberg’s consensus forecasts 86.5 on confidence. At 10:30, though a day later than usual, look for the EIA’s Petroleum Status Report.

Friday

Friday brings two important economic reports. At 10:00 AM, the Census Bureau is set to report New Home Sales for November. Both Reuters and Bloomberg report expectations for an annual pace of 720K, compared to 728K in October. Nothing new for investors to absorb here, and I suggested investors start picking at Toll Brothers (NYSE: TOL) in my article about a month back.

The National Association of Purchasing Managers – Chicago is scheduled to report on Friday. Recent readings from both the Philadelphia and New York area manufacturing sectors have indicated a weakening trend. Chicago could add confirmation when it reports, and Bloomberg’s consensus of economists is looking for a reading of 52.3, which represents expansion.

The EIA’s regular Natural Gas Report has been pushed back a day to Friday this coming week. At 3:00 PM Friday, Farm Prices for December are due, and wheat has been on quite a run. Pressure continues on foods producers and they have been gradually shifting burden to consumers.

Not a creature was stirring, not even a mouse, but three companies are scheduled to close out the very light earnings week: Cal-Maine Foods (Nasdaq: CALM); Charles & Colvard (Nasdaq: CTHR); and Mesa Air Group (Nasdaq: MESA) are due to report. Happy holidays!

(disclosure)