Wednesday brought us another FOMC decision, and without any real surprises. As expected, the Fed left current interest rates at the zero to 0.25 percent rate. The Fed also confirmed that it will continue with its current taper pace of $10 billion to the asset purchase program. Neither of these announcements should be a surprise to anyone, so observers tend to carefully dissect any other comments that the Fed makes.
Key Fed Comments
Fed Chair Janet Yellen stated “growth in economic activity has rebounded in recent months. Labor market indicators generally showed further improvement. The unemployment rate, though lower, remains elevated.” Fedspeak translation: The economy is improving, but not enough to stand on its own without help. Just as it had said at the previous meeting, the Fed intends to keep short term rates low for “a considerable time.” When asked to clarify how long that may be, Chair Yellen said “There is no mechanical formula whatsoever for what ‘a considerable time’ means.” The Fed is doing its best to talk its way around any hint of when they may be tightening interest rates.
Stocks Hit New Highs
The market seemed to like the idea that low interest rates are still here for quite some time. The S&P 500 put in a new contract high (1950.25 on the September E-Mini) as buyers came into the market after the announcement. Right now the phrase “don’t fight the Fed” is in my head, as I decide which way to play this market. I don’t see a lot of other data pushing this market up, traders and investors are leaning much more on statements from the Fed than some of the numbers.
The Trend Is Your Friend
I’m going to go with the trend on this one, buying the July E-Mini S&P 500 1975-2000 bull call spread at 7 points ($350.00) or better. The options expire on July 18, so we have just under a month to see a further move up in the index. Risk is limited to the cost of entry plus fees and commissions. I am setting a target exit at 20 points, and would look to get out for a 4 point loss if the upside move does not continue.
Trading And Soccer
The world becomes a smaller place as eyes from around the planet are turned to Brazil for the World Cup. The attention and focus of fans from around the world is on colorful display for everyone to see. The passion of many reminds us of where the term “fan” comes from, fanatic. I often wonder what kind of traders we would all be if we gave the same passion, enthusiasm, and dedication to our trading. I hope you are as committed to you trading as much as you are to your favorite team.
Webinar
For those interested Walsh Trading is holding our weekly grain webinar today Thursday June 19 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.
