Tag Archives: FOMC

Setting The Tone For The Year

Welcome back! Hope you had an enjoyable holiday with your loved ones and got some well-deserved rest and relaxation. Markets got off to a choppy start to the new year after a rough finish to 2014, with the Dow finishing barely in the green after an early 100+ point pop that quickly fizzled out, while both the Nasdaq and S&P 500 closed red on the first trading day of 2015. Amidst the volatility gold managed to stage a modest rally on Friday, but still under the $1,200 level, with miners GDX and juniors GDXJ ending strongly up on the week. Natural gas  continued to crumble with an EIA draw of -26bcf, well below expectations of -38bcf despite colder weather forecasts. Futures closed below $3 for the second time on Friday despite a strong morning rally that held above $3 most of the morning but was abruptly cut in half with a massive plunge back below by 14:25ET. The triple-leveraged UGAZ and DGAZ ETFs have been trending the past few weeks on StockTwits, with UGAZ losing more than 75% of its value in just over a month! Conversely, DGAZ has more than doubled over the same period.

Russian markets have been closed this week since Dec. 30th and reopen on Monday, but with another holiday on Jan. 7th. This has not stopped traders from making bets on the RSX Russia ETF as well as its triple leveraged cousins RUSL and RUSS, which have seen a wild ride tracking the volatile movements in crude oil and the ruble, both of which have resumed their downtrend.

The first full trading week of 2015 should set a more decisive tone for the short term, with some key economic releases including jobs data Wednesday through Friday, as well as the FOMC minutes on Wednesday. ISM non-manufacturing numbers are also due Tuesday morning (full calendar here). Some notable earnings this week include Micron Technology, WD-40, SUPERVALU, Bed Bath and Beyond, Constellation Brands and Apollo Education. As usual Alcoa kicks off the main reporting season the week after on Jan. 12th, with major financials Goldman Sachs, Bank of America, Citigroup, JP Morgan and Wells Fargo reporting the same week.

That’s it for now- trade well and stay disciplined, and wishing you all a great start to 2015!

The first loss is the BEST loss

If I took my losses as quickly as I did my profits, I’d be laughing all the way to the bank… Unfortunately, the psychology of fear and greed always plays a pivotal role in trading, and when you’re looking at a losing position, the fear of missing a rally or higher prices after cutting a loss is usually what keeps me in that little extra bit longer- you’ve probably been there before- ‘just wait until the 11:30am post-Europe close ramp’, ‘just wait till the 3pm ‘power hour’,’ ‘just 5 more minutes to the half hour mark in this 15 minute downtrend… and those few minutes until the next ‘checkpoint’ become an excruciating eternity as I see my position dwindle and the loss swell larger. With my Hindsight Glasses on, I can see that I should have closed my long SPY call position early yesterday on any spike opportunity that we got. Instead, I chose to wait it out, and even added a small average down on what looked like a stabilizing base and rally mid-morning. Unfortunately, as you all know, the market plummeted in the last hour, ending on new lows, making it the worst performing week of 2014 for the Dow (another minus three hundy day!) and S&P 500. And just a few days ago we were about to breach new all-time highs just shy of Dow 18,000!  My hesitation was rewarded with a LOD (low of the day) print in my position, closing it out at the last minute right before 4:15pm in after hours, when the SPY printed even lower lows and the VIX spiked higher (I was amused by an AAPL defender saying “VIX isn’t spiking, which means market sell off is aggregated to some big companies. Apple way oversold.” So 11 to 21 in a week is not spiking eh? Uh huh. Lots of levels of denial in that statement…). Fortunately I had taken gains earlier in the day on my WAG and GPRO calls, so I basically ended slightly negative to flat. I am reminded again of the very useful adage, “sell when you can, not when you have to”.  Being put to a decision during the last 5 minutes of trade when your position is at the day lows is not a feeling that I ever want to repeat having.

Once again oil collapsed, hitting fresh multi-year lows to close below $58/barrel, which is a stunning 22% nosedive from just the November 27 OPEC meeting, let alone from $100+ in the summer.

It has been a very volatile and whipsaw-y week, to say the least. I loaded up some SPY puts after seeing some bearish signals on Monday, and closed them on Tuesday for a tidy profit after the market tanked in the morning before bouncing back strongly. I attempted to keep some short exposure in the market by getting back in some December 205 puts at $1.94, having scaled out of them earlier near $3, but was stopped near the day lows as the market continued to bounce. Too bad, as these puts steadily held above $3-4 over the next few days as the market continued its decline, and closed at the week’s high of $5.75! S&P 500 futures closed below 2,000 at 1,998 so this will make for an interesting week with the FOMC meeting on Tuesday and Wednesday, with an announcement on Wednesday Dec. 17 at 2pm eastern.

So, my mantra from now on is “The first loss is the best loss. Take the first before it gets worse!!!”  Trade well, and stay disciplined my friends.

Thar’s GOLD in them thar hills!

What appeared at first to be another rout in gold on Friday turned into a monster bounce rally, after prices hit a low of $1,146 before roaring all the way back up to $1,192, just shy of the psychologically important $1,200 level. This lit a fire under the still beaten-down and almost forgotten miners index, GDX, which clocked a massive +6% gain and closed above the recent $19 resistance level. The triple-leveraged NUGT ETF added 17.4% to close at $13.90. Could this be the start of a recovery after falling off the cliff last month upon the official announcement of the end of QE? The weakness in the US dollar also helped, as it took a breather after a strong rally, which also helped oil prices bounce.

This has been an impressive week for tech names, with AAPL hitting new all time highs of $114.19, just a hair’s breadth away from the pre-split $800 level. YHOO also powered to new highs, as did BABA, reaching exactly $120 before pulling back five bucks and change. Interestingly, BBRY also broke through $12 on Thursday, a level not seen since August 2013, as CEO John Chen announced new software and gave a tantalizing glimpse of his plans for potential new partnerships in China with Lenovo and Xiaomi, as well as confirming a deal with Samsung during their Investor Day event. Unfortunately any bets on a strong finish to the week proved, well, fruitless, as it gave back all of Thursday’s gains and more. Granted, the stock had already rallied the entire week so perhaps this was the pause that refreshes.

FOMC minutes are out this Wednesday at 2pm ET, as well as some jobs and housing numbers the rest of the week. Full US economic calendar can be found here.

Droptober’s Wicked Bounce

Here we go again, just 2 weeks after the biggest correction of the year and what looked to be the worst October in a long time, with markets tanking almost 10% in a week, everyone is now suddenly bullish again, and charts and seasonality indicators like ‘Year 6 of presidential term Nov-Dec averages +7%’ are being tweeted furiously on StockTwits and Twitter. What changed in those 2 weeks? Ebola fears in the US, which were causing a lot of volatility, died down, as well as other worries such as ISIS beheadings and their invasion of key Iraq outposts. All of a sudden the bad news in the mainstream media went quiet. And no news apparently is good news for the markets. We appeared to be climbing the V-shaped ‘Wall of Worry’ out of the hole, and BTFD (Buy The F-ng Dip) was once again in vogue. Another event which also appeared to be causing an overhang in an otherwise bullish market was the much anticipated end of QE, which the Federal Reserve officially announced on Wednesday. R.I.P., Easy Money. On that day markets had a tepid reaction, dropping nearly 100 points before recovering most of that by day’s end, 2 hours after the FOMC announcement. The next day markets ripped higher, with the headline Dow Jones up triple digits due largely to strong results from Visa. By the end of the day the Dow was up over 200 points but sentiment was still cautious, and you could see many traders positioning some hedges and outright ‘Short The F-ing Rip’ positions to hold overnight before the last day of trade for the weekend.

Then came the absolutely unexpected move by the Bank Of Japan: expanding its QE program, which caused the Yen to plummet and the Nikkei 225 to rip almost 5%, a gain of over 700 points. Uh oh, bears. After the wild rip in the Japan overnight session, Wall Street opened strongly and never looked back.  The S&P 500 surged over 1%, and bears were gored by the stampede. It was comical to see a flurry of tweets from perennial permabears every time the SPY paused for a $0.10-0.20 pullback, predicting this to be a breakdown in a way overbought market (for an excellent brief primer on how to spot a permabear, click here). Well, the breakdown never came, and the major indices closed near the all-time highs once again. In the week ahead there are some key events to look forward to, including the US midterm elections on Tuesday, November 4, the ECB interest rate decision on Thursday, November 6, and the Jobs Report on Friday, November 7. If recent history is a guide, all of these have a bullish bias to them, and there could be further upside to the markets. Trade well and stay disciplined.