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#Post#: 228--------------------------------------------------
FOMC minutes and the futures markets
By: Carley Garner Date: November 19, 2014, 11:21 pm
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The Fed considered making a change, but didn't
The release of FOMC minutes (basically a transcript of the
discussions that took place in the most recent Fed meeting),
can't get much more boring than they were today. There are days
the minutes trigger nearly as much volatility than the actual
FOMC meeting; obviously, this wasn't one of those occasions.
The Fed minutes were exactly as most expected them to be. All
but one member supported the end of the quantitative easing
program. Further, there was some consideration of dropping the
phrase "for a considerable time" in regards to their time frame
to keep rates at record low levels.
The Fed is expecting market "turbulence" once the decision to
increase interest rates is made. However, I'm not sure that is
necessarily the case. I would argue that most market
participants are expecting higher interest rates in 2015, and
most of them believe changes in monetary policy will be the
culprit. Thus, there shouldn't be a lot of panic.
According to the CME's Fed Funds Futures contract probability
calculator, there is an 86% chance of the Fed increasing rates
by December of 2015.
Treasury traders are desperately looking for a reason to pick a
direction
Bond and note trade continues to struggle for an identity.
Seasonal tendency suggests we should see bearish trade take hold
in late November. Most specifically, the Commodity Trader's
Almanac points out that selling in late November and holding for
107 days (likely longer than most of your time horizons) yields
relatively attractive prospects. We aren't advocating that you
do so, but it is worth keeping in mind as the next few months
unfold.
From a charting perspective, we are getting mixed signals from
oscillators but the trading pattern is relatively loud and
clear: As long as prices in the ZB stay below 142'15ish, we
should see prices make their way lower. Simple trend-lines
suggest the mid-138s could be possible.
Treasury Market Ideas
**Consensus:** If stocks continue higher, the ZB will likely
move into the mid-to-high 138s.
**Support:** ZB: 139'26, 138'27, and 136'29 ZN: 125'24, 125'04,
124'16, and 123'17
**Resistance:** ZB: 142'16, 144'25, 146'04, and 147'29 ZN:
127'01, 128'10, 129'19, and 130'17
Position Trading Recommendations
*There is unlimited risk in option selling
Short January 136 puts and 145 calls for about 56 ticks (see
details at bottom of newsletter).
2055 held nicely, but we aren't convinced the rally is over. Can
we get 2077?
In late October, we reminded traders of the swift seasonal
bullish pattern that tends to take place in the equity markets
going into the Thanksgiving holiday. You might recall, we
mentioned the month of November is ranked second in performance
in all three major indices (S&P 500, Dow, and NASDAQ) on midterm
election years. We also mentioned that the week before
Thanksgiving has been up in 15 of the last 20. For these
reasons, we can't justify being in a hurry to get bearish.
Additionally, the day before and after Thanksgiving combined has
seen losses in only 13 of the previous 61 occasions (according
to the Stock Trader's Almanac). The best strategy appears to be
coming into the holiday week with a bullish tilt with
expectations of turning neutral to bearish into Friday's
strength. Don't ruin your holiday by making big bets going into
holiday trade!
Stock Index Futures Market Ideas
**Consensus:** The resilience of this market has forced us to
revise our upside targets. We see the possibility of 2072ish.
Thanksgiving has traditionally been bullish for stocks!
**Support:** 2012, 1970, and 1947
**Resistance:** 2055, 2072, and 2083
Position Trading Ideas
Flat
Day Trading Ideas
**These are counter-trend entry ideas, the more distant the
level the more reliable but the less likely to get filled**
Sell Levels: 2056 (minor), 2072, and 2083
Buy Levels: 2038, 2031, and 2024
In other markets....
June 12 - Buy September mini corn futures near 440.
July 8 - Add on to mini corn scale trade.
August 19 - Add to the mini corn and wheat scale trades by
purchasing December mini futures contracts.
August 21 - Sell a December DX futures contract and buy an
October 83 call for about $300. The total risk on the trade
should be about $1,000 before commission (depending on your fill
prices). The profit potential is theoretically unlimited.
August 26 - Roll September mini grains (wheat and corn) into
December contracts to give the market more time to recover.
September 4 - Sell October DX 83 call to lock in a profit of
about $700 before transaction costs. The futures portion of this
trade is underwater, we are hoping for a reversal in the coming
week or so.
September 9 - Sell November Euro 133 calls and 125 puts for
about 65 ticks ($812.50).
September 10 - Sell December crude oil 82/98 strangles for about
$1.10 ($1,100).
September 15 - Buy March 2015 sugar 18.00 calls near 32 ticks.
September 24 - Buy back the November Euro 133 call to lock in a
profit.
September 24 - We've reached our pain threshold in the dollar,
let's exit the DX and go to the option market. We recommend
selling double the quantity of the December Euro 123.50 puts and
the 132 calls for about $800 per strangle.
September 29 - Buy back the December crude oil 82 puts to lock
in a profit of $370 to $400 per contract, and replace them with
short 86 puts. This brings in more premium and rebalances the
trade.
October 2 - Buy back November Euro 125 puts at a small loss
(combined with call you should be slightly ahead, or at least
breaking even on this venture after commissions).
October 2 - We made a big mistake rolling our 82 puts higher.
Let's rebalance the trade and look for volatility to decline by
offsetting the existing strangle and selling the December
95/82.50 strangle.
October 9 - Buy back 95 crude oil calls to lock in gain on that
side of the trade.
October 10 - Sell December crude oil 92 calls for about 60 cents
to hedge the 82.50 puts.
October 14 - Sell December bond 147 calls for about 30 ticks.
October 15 - Roll the December crude strangles into a January
70/90 strangle AND a December 74/88 strangle.
October 15 - We were clearly a day early on this one, roll into
December 151/142 strangles.
October 17 - Buy back December bond strangles and sell 140/146
strangles to restructure the trade.
October 22 - Buy back December crude strangles to lock in profit
of about $1,000 (this goes toward the premium lost on the 82.50
put).
October 29 - Buy back the 30 year bond 146 calls to lock in
profit of about $500 per contract before transaction fees (this
goes toward loss on original call sale).
October 29 - Buy back Euro 132 calls to lock in profit of about
$300 per contract before transaction costs.
November 4 - Sell December Euro 128.50 calls for about 28 ticks.
This re-strangles the market and brings in a little more premium
ahead of the employment report.
November 4 - Buy back December bond put at a small profit, then
sell a January 145/136 strangle to establish a neutral short
option strategy.
November 10 - Sell January crude oil 87 calls for about 40 to 45
cents.
November 17 - Buy back the January crude oil 87 calls to lock in
a profit of about $230 to $260 per contract before transaction
costs.
(Our clients receive short option trading ideas in other markets
such as gold, crude oil, corn, soybeans, Euro, Yen, and more.
Email us for more information)
DeCarley Trading
Twitter:@carleygarner
info@decarleytrading.com
1-866-790-TRADE(8723
www.DeCarleyTrading.com
www.ATradersFirstBookonCommodities.com
Due to time constraints and our fiduciary duty to put clients
first, the charts provided in this newsletter may not reflect
the current session data.
**Seasonality is already factored into current prices, any
references to such does not indicate future market action.
**There is substantial risk of loss in trading futures and
options.**
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