Sunday, October 19, 2014

The Week Ahead: Homes and prices

Look for a week of homes and prices in the week's major economic reporting. Both are important, homes because they housing market is often the signal of future times, both good and bad, much like the proverbial canary in a coal mine, and prices because they are a key indicator the Federal Reserve uses in setting the interest rates under its control.

Existing home sales will be published Tuesday and new home sales on Friday, both at 10 a.m. New York time. Existing homes, where the buyer isn't the first owner to move in, are by far the greater share of the market.

The consumer price index, which measures the presence of inflation or deflation in household expenses, will be released on Wednesday at 8:30 a.m.

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 leading indicators are combined once a month into the index of leading indicators. While it is not itself a leading indicator, I find it to be a useful You Are Here marker for the economy. It will be out on Thursday at 10 a.m.

Other items of interest:

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

Thursday: Purchasing Managers Institute manufacturing index flash release at 9:45 a.m.

I also keep an eye on the Baltic Dry Index, updated daily.


Fed Gov. Jerome Powell conducts a webinar and conference call on community banking,  and Fed Gov. Daniel Tarullo addresses a Fed conference in New York, both on Monday.

The Federal Reserve Board meets Wednesday at 3:30 p.m. to discuss the Credit Risk Retention Rules. The rules are part of Section 941 of the Dodd-Frank Act, which made reforms to banking and investment rules in the wake of the Great Recession. The rules under discussion are intended to to govern the placement of risk when mortgages and other sorts of financial contracts are combined into into anonymous pools sold to investors, a major factor in triggering the recession. A Reuters report about the meeting may be read here.

Analytical universe

This week I shall be analyzing new bull and bear signals among 1,354 mid-cap and larger stocks and exchange-traded funds.

Trading calendar

By my rules, I'm trading November options and later 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 February options and later for single calls and puts as well as straddles. Shares, of course, are good at any time.

Good trading.

-- Tim Bovee, Portland, Oregon, Oct. 19, 2014

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