This Friday, Federal Reserve Chairman Ben Bernanke will deliver a speech at the annual Jackson Hole policy summit. Some Fed-watchers believe that this is when we will more concrete clues about what policy actions the FOMC might take at their September 12-13 meeting, especially since the 2010 speech was used to telegraph QE2.

I happen to agree that this speech is important, but at the same time, I'm not expecting QE3. I just think that this Jackson Hole speech is significant for the following 3 reasons...

1) The most recent FOMC minutes (from the Aug 1 meeting) had some shifts in language and emphasis that showed a Fed very ready to act when needed and highlighting that the economy has significant capacity to handle more QE. We should expect more clarity from Ben on what these gestures and tone meant.

2) Lots of data economic data points -- some fairly good -- have occurred since the last meeting, so Ben gets a chance to provide fresh analysis of the economy.

3) The Sep meeting is one of the quarterly ones with an update of economic forecasts and a Big Ben press conference. So, we will get some idea about if the FOMC economists are lowering their projections for GDP and inflation and raising them for unemployment.

This is all very important and Jackson Hole will give us clues about what to expect come Sep 12-13.

But, three other issues affect Fed decision-making and timing:

1) Will they avoid political mud if they act near the election? Do they care, or are they faithful economists who only care about the path of the economy regardless of politics? Even if Bernanke and Co. are above the fray, some of their own are concerned about perception affecting reality, Dallas Fed's Richard Fisher among them.

2) It is now common wisdom that the Fed is "out of ammo" and beyond "pushing on a string." Will they want to save arguably their last bullet until it is really needed, say surrounding another Congressional train wreck that pushes the economy over Ben's Fiscal Cliff?

3) Speaking of train wrecks, how much does the euro-mess drive Fed concerns? If Europe doesn't get QE religion soon, will the Fed feel compelled to buy more insurance against their deepening recessions and anxieties?

Given all these moving parts in Fed game theory, is this market rally built on stimulus dreams and will players be disappointed when they don't get any better certainty about it this Friday?

Or, does the rally live regardless of Fed words and moves? I think it does. We may actually get a sell-off this week in advance of the speech and then the rally continues next week.