No Surprises From Yellen, But E-Mini S&P 500 Still Vulnerable

There weren’t any surprises in Wednesday’s FOMC announcement, but it did leave us a little room for debate. Policy rates remained the same (.25%), and the taper will continue, reducing asset purchases by $10 billion to $15 billion per month. The Fed expects to end the bond purchase program next month, which would appear to be step one towards a change in interest rates.

As it has been with many of the Fed’s announcements, market observers were paying closer attention to the “language” of the statement than any decisions. The phrase “considerable time” made another appearance in reference to how long the Fed will maintain current interest rates after the end of the bond purchase program.  This appeared to be a point of debate between some Fed governors, as hawks and doves are both trying to spread their wings.

In classic Fedspeak, Chair Janet Yellen said that FOMC members had probably moved up their forecasts of how soon interest rates will rise after seeing unemployment rates fall and inflation rise at quicker pace. This statement doesn’t exactly go hand in hand with the “considerable time” mantra that we have been hearing. Let the “When will the Fed…..” debates continue.

Trade Idea

The market still seems to like the current Fed policy.  I can see the upside continuing but the calendar also has me concerned about a pullback. I like buying the October E-Mini S&P 500 1975-1925 put spread at 8 points ($400.00) or better). This bearish spread will expire on 10/17/14, so we have just under a month to be in the trade.  Risk is defined to the cost of entry plus fees and commissions. My initial target exit is at 20 points.

Webinar

For those interested Walsh Trading is holding our weekly grain webinar today, Thursday September 11th at 3 pm 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.