Sunday, April 26, 2015

The Week Ahead: Money policy, GDP, income and outlays

The Federal Open Market Committee statement will be published Wednesday at 2 p.m. New York time at the end of a two-day meeting. The Federal Reserve is on the cusp of gradually changing its approach to monetary policy from an offensive game -- promoting growth -- to a defensive one -- defeating inflation. The statement will provide yet another frame in the central bank's slow dance.

A first look at gross domestic product in the 1st quarter will be released Wednesday at 8:30 a.m. Two subsequent estimates, presumably of greater accuracy, will follow at monthly intervals, but as the first of the series, this release generally has the greatest impact.

Personal income and outlays will be out on Thursday at 8:30 a.m., and the Institute of Supply Management manufacturing index on Friday at 10 a.m. Both answer the "How are we doing" question at opposite ends of the economic process -- supply from manufacturing and demand from spending power.

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.

Vendor performance, also called the deliveries time index, from the ISM manufacturing survey, at 10 a.m. Friday.

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

Index of consumer expectations from the Reuters/University of Michigan consumer sentiment report, at 10 a.m. Friday.

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

Other items of interest:

Monday: The Dallas Federal Reserve manufacturing survey at 10:30 a.m.

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

Wednesday:  Pending home sales at 10 a.m. and petroleum inventories at 10:30 a.m.

Thursday: The employment cost index at 8:30 a.m. and the Chicago PMI index of business conditions in the Chicago area at 9:45 a.m.

Friday: Motor vehicle sales throughout the day, the PMI manufacturing index, based on a survey of purchasing managers, at 9:45 a.m. and construction spending at 10 a.m.

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

Treasury Debt

  • 4-week: Announcement Monday 11 a.m., auction Tuesday 11:30 a.m., settlement Thursday
  • 3-month: Auction Monday 11:30 a.m., announcement Thursday 11 a.m.
  • 6-month: Auction Monday 11:30 a.m., announcement Thursday 11 a.m.
  • 52-week: Settlement Thursday
  • 2-year: Auction Monday 1 p.m., settlement Thursday. 
  • 2-year floating rate: Auction Wednesday 11:30 a.m.
  • 5-year: Auction Tuesday 1 p.m., settlement Thursday.
  • 7-year: Auction Wednesday 1 p.m., settlement Thursday.
  • None
  • 5-year: Settlement Thursday.

Deputy Director Mark Van Der Weide of the Fed's Division of Banking Supervision and Regulation testifies on insurance regulation before the Senate Banking, Housing and Urban Affairs Committee on Tuesday at 10 a.m.

Fed Gov. Daniel Tarullo, a member of the FOMC, addresses the Independent Community Bankers of America policy summit on Thursday at 8:30 a.m. His subject: "Tailoring community bank regulation and supervision".

Another FOMC member, San Francisco Fed Pres. John Williams, gives a speech on Friday.

Cleveland Fed Pres. Loretta Mester, an FOMC alternate, also speaks on Friday.

Analytical universe

This week I shall be analyzing new bull and bear signals among 492 large-cap stocks and exchange-traded funds.

Trading calendar

By my rules for shorter-term trades of Monthly options, I'm trading May 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 August options and later for single calls and puts as well as straddles. Shares and Weekly options, of course, are good at any time.

Good trading.

-- Tim Bovee, Portland, Oregon, April 26, 2015


My trading rules can be read here.


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