Wednesday’s FOMC didn’t bring any surprises. I don’t think anyone was looking for action from the Fed, and the Fed lived up to that expectation. But the tone of the Fed’s statement might have turned a bit more hawkish from the previous dovish announcements.
The term “strengthened” made an appearance in describing the current labor market, probably referring to the addition of 287,000 jobs in the June jobs report. “Growing strongly” was used to describe current household spending, another point for the hawks. I don’t think a rate hike is around the corner, but the possibility of a December move just got a little bit bigger.
The latest news from the FOMC may have slowed down the run up in the equity markets. The 2200 level in the S&P 500 just got a bit tougher to reach. A strong retracement over the next few weeks would not surprise me as traders position themselves for the longer term. I’m not looking for a complete wash out, more likely a see-saw move back and forth.
I’m looking at collecting a bit of premium selling a credit spread. I like selling the Sep E-Mini S&P 500 2205-2035 call spread at 10 points ($500) or better. This trade is basically bearish, saying we don’t believe the S&P 500 will trade and stay above the 2200 level. Risk is defined to 20 points, and maximum loss would occur with both strikes in the money at expiration on September 16th. I am looking to limit a loss at 10 points if the market continues to rally.
For those interested Walsh Trading is holding our weekly grain webinar Thursday July 28th at 3:00 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.
