The Week Ahead: Money policy, GDP, confidence and juice

This is a high-impact week in the world of economic reporting, with a Federal Open Market Committee announcement about monetary policy at 2 p.m. New York time on Wednesday at the end of a two day meeting, and the first look at 3rd quarter gross domestic product, the advance estimate, at 8:30 a.m. on Thursday.

Two other potential market movers will punctuate the week, durable goods orders on Tuesday and personal income and outlays on Friday, each at 8:30 a.m.

Parsing of the FOMC announcement will carry on the theme that has dominated economic discussion the latter half of the year: When will the FOMC begin tightening the money supply, fulfilling its job of taking away the punch bowl just as the party is getting to be fun.

GDP is an important element of their decision making, despite the fact that is an intensely lagging indicator.

The durable goods report measures the level of confidence required to make a big-money commitment, and personal income and outlays, used to calculate the savings rate, help of give a sense of whether Americans will have the juice needed to fuel the economic recovery.

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 Reuters/University of Michigan consumer sentiment report, at 9:55 a.m. Friday.

Other items of interest:

Monday: The pending home sales index at 10 a.m. and the Dallas Federal Reserve Bank manufacturing survey at 10:30 a.m.

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

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

Friday: The employment cost index at 8:30 a.m. and the Chicago purchasing managers index at 9:45 a.m.

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

Fedsters

The Federal Reserve gitterati tend to go silent in weeks when the Federal Open Market Committee meets, yielding the stage to Fed Chair Yellen. She breaks with the usual practice by giving a public speech on Thursday, at the Federal Reserve Board's National Suit on Diversity, at 9 a.m.

Analytical universe

This week I shall be analyzing new bull and bear signals among 1,371 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. 26, 2014

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