We head into a holiday weekend which can make trading difficult and challenging. Those challenges pale in comparison to those who gave the ultimate sacrifice to protect our freedoms. Take a moment to remember that Memorial Day is not just another bank holiday.

Fed Policy News

The Federal Reserve released the minutes from their last FOMC meeting on Wednesday, and as usual market observers looked closely for hints on future Fed policy. The minutes showed that the Fed has started to lay groundwork for an exit from its current stimulus program. Several plans as how to back away from current policy and possibly raise interest rates were presented, but were to be considered “prudent planning” not a sign that a rate hike is near. While the committee did not show any clear indicator of when this will happen, it does let us know the talk of a move to higher interest rates is on top of the discussion list.

Market Rally

The equity markets seemed to like the news, moving higher shortly after the release of the minutes. Traders viewed the new as a confirmation of the Fed’s stated policy, the will raise rates and cut back the stimulus program as long as data (employment, inflation rate) allows them to. In other words, low interest rates and the flow of money into the asset purchase program will continue, both positive signs for the equity markets.

E-Mini Trade

The S&P 500 has had a small bounce back from the visit to the 1800 level in mid-April. Investors seem to have a bit of confidence again, and 1900 is within their eye sight. I like playing a continued move to the upside, buying the June E-Mini S&P 500 1910-1935 call spread at 7 points ($350.00) or better. Maximum risk is defined to the cost of entry plus fees and commissions. Expiration is on June 20th, so we have nearly a month to see if the market comes to those levels. If it looks like we are on the wrong side, and a move to 1900 fails, I would look to get out for a 3-4 point loss. I don’t expect to get full value of the spread (25 points), so I am setting an exit target at 20.

Webinar

For those interested Walsh Trading is holding our weekly grain webinar series next Friday May 30th at 3pm central time hosted by our Senior Grain analyst Tim Hannagan. Tim has been ranked #1 by Reuters and Bloomberg in 2011 and 2012 for his most accurate end of year price predictions for soybeans and corn. Registration is free and if you cannot attend live, a recording will be sent to your email upon signup.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.