Are you ready? CPI, PMI Manufacturing, and New Home Sales

It is said that time goes by faster when you're busy. Well, expect this morning to pass you by like a Bugatti Veyron with all the important indicators that will be released: CPI, PMI Manufacturing, and New Homes Sales. Lets look at how they can impact gold, the stock market in general, and the stocks I'm currently holding.

Consumer Price Index at 8:30

Let's start by the indicator impacting the most consumers; CPI. The Consumer Price Index measure the increase or decrease in consumer prices for a basket of goods. Through the years, the items in that basket change when the Bureau of Labor Statistics recalibrate the value of different items. For example, is the value of a television set 10 years ago the same as today? 

One of the two indicators that the Federal Reserve is watching closely is the CPI. If there's a surprise today and it increases more than expected ( CPI y/y of -0.1% is expected), then it may be a signal for the FED to increase rates sooner. Even if they don't do it, at least that's what investors and traders will think. Therefore, in that scenario we can expect stocks and commodities prices to go down.

PMI Manufacturing at 9:45
PMI Manufacturing is one of the most important leading indicators. It is basically a survey sent to purchasing executives of 600 industrial companies. Expected is a reading of 54.6. If it's higher than that, then again it could scare investors and traders in thinking that the FED will raise rates sooner than expected. In that scenario stocks and commodities prices would go down also.

New Home Sales at 10:00
New Home Sales is similar to Existing Home Sales, except that it only tracks new homes. Analysts expect a reading of 464K new homes sold for this month. New Home Sales is also a leading indicator. Therefore, a better than expected reading could be bearish for stocks and commodities, again because investors and traders would be scared that the FED hike rates sooner than expected.

I personally own Five Below (FIVE), COS.CA (COS.TO), and Tesla Motors (TSLA). If those indicators readings are better than expected it could be bearish especially for FIVE and TSLA how are positively correlated with major stock market indexes.

After hours trading summary

Today was a good day which saw FIVE up a bit more than 3%. However, oil dipped to lose all the gains from yesterday. I normally hang out on on forums and social medias related to trading or investing during the day, and I can see that opinions are polarized and vigorous when it comes to commodities.

The first group of people thinks that commodities are immensly overvalued and that they will sooner or later surge. The second group thinks that deflation will prevail and that commodities will continue their way down. The first group tend to see gold as money with intrinsic value. The second group sees gold as a useless piece of metal that can only be used in jewelries. Who's right?

The platonic truth is that both are right. Value is only created through the eyes of the one looking. Throughout history gold has been money, and then simply a tool used in jewelries. The value people put into anything follow the swing of a pendulum; from one extreme to another. If we admit that is the truth, then the only thing we can do is ask if gold is currently hated or loved by the pool of investors and traders. When most people think its only a tool, its the time to buy, and when most people think its money, its time to sell.

I believe that gold has been loved so much these last years, mostly because of the internet and the promotion gold has received, that this pullback is simply healthy. However, like Warren Buffett said:"Gold is basically being long on fear." 

Currently, people are not really scared. The US economy is "recovering" and world tensions seem to have eased. One can wonder what will happen when fear and consumer confidence sink? Gold will probably surge. For these reasons, I see gold more as an hedge than a speculative instrument.

Gold, miners, and their leveraged ETFs like NUGT and JNUG can be traded successfully. In my opinion however, they are not the easiest instruments to trade and make money with. The big advantage is that they will never go to zero. The big disadvantage is that big pockets with a variety of interests will try to influence them, and that may play against you.

That being said, I'm still watching miners to jump back in at one point. In the meantine I'm watching closely stocks like GPRO and TSLA who might turn out to be great opportunities.

Is FIVE BELOW tradable?

“Dougherty & Co upgraded shares of Five Below (NASDAQ :FIVE) from a neutral rating to a buy rating in a research report released on Thursday morning, TheFlyOnTheWall.com reports. Dougherty & Co currently has $36.00 price objective on the stock.” - wkrb13.com

This is a stock that could be profitable this week. It has suffered a lot in 2015, dropping from almost $47 to $28 a share this month. That being said, I believe the stock will change course in the near future.

The thing with FIVE is that the volume is pretty low, which makes it a better candidate for swing trading than day trading. Also, one could argue that the bounce from last week was a dead cat bounce.

I would not necessarily invest for the long term in FIVE giving its price to book ratio of 12 and price to earnings ratio of almost 45. However, I do believe that it is swing tradable for a quick profit.

I’ll be watching this stock tomorrow and let my subscribers know my moves.