Fed Shmed... Here's The Real Skinny

Last night I said that the bell saved the markets from further downside. This morning I looked like a fool being as pre-open futures were showing super strengths in anticipation of the Fed's statement.

The open quickly faded to lows continuing yesterday's weakness like I anticipated. Then the Fed statement came out SUPER bullish (more on that later) and markets took off.. I told members to watch how markets behave towards the morning highs... The SPX and Nasdaq labored and finally got to those morning highs only to revisit the day lows. Meanwhile, the Small caps (my favorite gauge) never regained the open highs. Sure we still have the Nasdaq green BUT not many mention that two heavy-weights in that index are up over 5% each artificially skewing and showing strength that is NOT index-wide but rather single story driven: Amgen and ExpressScripts.

Tomorrow, we have claims ahead of the open. I don't think they will move markets. The weakness should continue. I am still more comfortable shorting than being tightly long.

Why was the Fed statement Bullish?

  • They said that even after all indicators tell them on paper that they theoretically need to  hike rates, they may still keep them low if they deem warranted
  • Also, they are not merely looking at employment percentage but also at the make up of the unemployment (what kind of jobs etc). So even if unemployment gets to 4% they can still say 'it's not the right kind of jobs so we are not raising rates.'
  • They are also looking at full employment as a trigger.

Apple never even got close to challenging the 100.

The S&P 12 month weekly chart continues to show the cusping trend I mentioned last week:

Here are the variables on my radar: Geopolitical events dominate my list of worries in order of seriousness:

  • The situation in Gaza. The longer it takes the messier the outcome for everyone involved.
  • Ukraine: the rhetoric is getting worse and now there is talk that Putin has little influence over the fighters. Also we have more talks of additional sanctions. I think that the West (especially Europe) has just as much to lose from sanctions as do the Russians. For this I look to Germany for clues.
  • Yellen: She needs to prove to me that she has a plan and is NOT waiting for something to break before she acts. So far, we are lost as to what to watch for signs of rate tightening triggers.
  • Earnings: These are last on my list of worries as somehow companies are managing their P&Ls and stock prices. I use the trader reaction to gauge sentiment so I can adjust my micro trades off my macro thesis.
  • Argentina default: Market say that they won't freak out if they actually default; i am not so sure. something to keep on the radar.
  • A new financial shoe to drop: leading my worrisome areas are China (lending shenanigans) then Japan (experimental macro-economic shenanigans).

This week we may get information that changes the macro but it's a LONG shot. I anticipate that if we do change it would be to revise the downside risk: change it from simple sell offs to much scarier option. Until then: "so much happen yet NOTHING HAS CHANGED" & I stick with my macro thesis and trade the ranges at play.

I will update the members in the am with all the new levels to trade this week.

Non-members, sign up and you too can get daily updates on where the markets are likely to trade. Marketfy guarantees that it's money well spent or you can take it back.

Nic.

Teaching traders make money from a relatively safe distance: Create Income with Options Spreads, a large community of Options Traders looking to create extra income by trading credit spreads. For just about the cost of a cup of coffee per day, you can get all the benefits of the CIWOS subscription, including analysis, alerts, trade recommendations, chats & video updates

Posted to Create Income with Options … on Jul 30, 2014 — 3:07 PM

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