Sunday, January 26, 2014

The Week Ahead: GDP, Money Policy, Consumers

The Bureau of Economic Analysis gives a first look at gross domestic product for the 4th quarter last year. The report will be released at 8:30 a.m. on Thursday.

The Federal Open Market Committee meets for two days, announcing results at 2 p.m. on Wednesday. It is the final FOMC meeting of Ben Bernanke's term as Fed chairman.

Three other major reports are on the schedule, all of importance to judging the mood of consumers, whose mood swings are an important part of the economic recovery.

New home sales will be released at 10 a.m. on Monday, durable good orders at 8:30 a.m. on Tuesday and personal income and outlays at 8:30 a.m. on Friday.

Confident consumers buy new homes and big-ticket durables while spending more than they save (income minus outlays). The three reports together tell us how willing we are to perform our civic duty. Prosperity is in your hands, America! Shop until you drop!

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims, at 8:30 a.m. Thursday. 

The index of consumer expectations from the consumer sentiment report, at 9:55 a.m. Friday.

I also keep an eye on the Baltic Dry Index, updated daily, which was a fairly terrifying indicator that things can come unstuck as the world sunk into economic crisis a few years back.

Other reports of interest:

Monday: Dallas Fed manufacturing survey of conditions in Texas at 10:30 a.m.

Tuesday: The S&P Case-Shiller home price index for 20 metro areas at 9 a.m. and consumer confidence at 10 a.m.

Wednesday: Petroleum inventories at 10:30 a.m.

Thursday: Pending home sales, properties in the twilight zone between the contract and closing, at 10 a.m.

Friday: The employment cost index at 8:30 a.m., the Chicago purchasing managers index at 9:45 a.m. and the Reuters/University of Michigan consumer sentiment report at 9:55 a.m.


None of the Fed glitterati  plan to take to the speaking platform during the week. They are no doubt focused on Chairman Bernanke's swan song on the FOMC. Is there a farewell office party planned? With punch and cake?

Analytical universe

This week I shall be analyzing new bull and bear signals among 3,877 stocks and exchange-traded funds that have some analyst interest. They are traded both on the major U.S. exchanges and over-the-counter.

Trading calendar

By my rules, I'm trading February options for the short legs of vertical, diagonal and calendar spreads and covered calls, and for all legs of butterfly spreads and iron condors. I'm trading May options for single calls and puts as well as straddles. Shares, of course, are good at any time.

Good trading.

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