What a difference a couple of days can make in the market. This week started off rather boring, slow flat and silently waiting for the Fed to make a move. Then they did it, the FMOC decided to raise rates again by 25 basis points, or one quarter of one percent. No big deal, we all thought this would happen and the markets responded on Wednesday with a simple, so-what.
I guess it took everybody sleeping on the FMOC meeting to decide that the pressures of commodities and bonds were simply to much to bear. The market is coming off its highs, and now has broken through the short term support levels. It looks to me as though we are in a for big downward slide, possibly all the way into the mid 1280’s for the SPX. The support levels around 1300 have failed, and the next looks like it is at about 1293 then 1280 or so. I wouldn’t be at all surprised if over the next couple of weeks the bears are able to dominate the market as we digest all of the recent activity.
The good news here, as I see it, is that if the market can continue to move back and forth, we should see an overall increase in volatility, which in turn means higher premiums and more money for the directionally neutral players! The VIX is pushing higher and the 6-month trend looks like we are going to continue in that direction. There is still a ton of movement required before we hit the highs from 2000 and 2001, but if the VIX will continue to move higher that would indeed be rather nice!
On the home front, the May positions are looking rather nice today. Both the RUT and SPX have dropped into the middle of my trading zone and things are looking up. I’m sitting on a 50 or so point cushion on each position and with only 5 trading days left, that typically spells worthless expiration – a beautiful, profitable, thing. Obviously with the markets trending downward in the short term, I’ll have to keep a bit of an eye out, and so should you. One bit of economic data, or a slip of the tongue by somebody on CNBC could make things turn around in a heart beat.
Categories: Options Trading
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