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#Post#: 48--------------------------------------------------
It is hard to fight the Fed (this week anyway)
By: fxvictory Date: September 16, 2014, 12:13 am
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September is a key month for the financial markets
September is known for being the end of summer vacations, and
the beginning of the true business year. In fact, the month of
September is believed to be a barometer of what is to come in
the next fiscal year.
Thus far, the economic data has been a little softer than we are
accustomed to. The dismal jobs report has set the tone, so
investors will likely be a little tougher on this week's
releases than might otherwise be the case. We are looking
forward to housing starts, building permits, and leading
indicators later in the week.
Naturally, Wednesday's Fed meeting will trump any economic
report. The Fed isn't expected to take action, but there is a
substantial amount of speculation on a hawkish change in
commentary (meaning they could be looking to raise rates sooner
than anticipated). The FOMC decision will take place at 2:00 pm
Eastern.
Dovish Fed should support Treasuries, but it could be a wild
ride
The Fed has generally been supportive for bonds and notes (at
least since the "taper tantrum" that occurred over a year ago).
This has been particularly true since Janet Yellen was handed
the reigns. We suspect that will be the case this time around,
but that doesn't mean the market can't troll lows (or make
moderately new lows) first.
We noticed that small speculators added aggressively to their
short holdings in the 10-year note (according to the latest COT
report). Thus far this year, any time this group has gotten
largely bearish it has back-fired. We believe this will likely
be the case again; after all, 'tis the season for bonds to move
higher and lofty stock prices leave the door open for an equity
correction that would leave Treasuries in favor.
Treasury Market Ideas
**Consensus:** We prefer being bullish on dips, but we cannot
rule out a trip to 135 in the 30-year bond should the 10-year
note opt to test 123'22.
**Support:** ZB: 135'25, 135, and 133'02 ZN: 123'22, and 122'29
**Resistance:** ZB: 137'09, 138'17, and 140'14 ZN: 124'25
125'08, and 125'29
Position Trading Recommendations
*There is unlimited risk in option selling
Flat
The September witch can be a "witch"
The September triple witch is known for being temperamental. If
you aren't familiar with her, she is the day in which stock
options, futures options, AND stock index futures contracts
expire. The triple witch comes four times per year (quarterly).
Sometimes this day is referred to as a quadruple witch because
single stock futures also expire on this day, but they are
highly illiquid and thus perhaps not significant enough to
mention.
According to the Stock Trader's Almanac, down weeks prior to the
triple witch tend to trigger down weeks after the triple witch.
Particularly, the September triple witch can be "dangerous" and
"pitiful". Knowing this, it might serve traders well to look for
a rally going into the Fed and Friday's triple witch, to get
positioned for potential selling next week.
We've already noted that the equity market tends to move higher
into the Fed and the quarterly expiration. To go a step further,
it is relatively common to see the market post an intermediate
term (extreme) high the morning of expiration (Friday), only to
succumb to selling pressure later in the day (or the following
week).
We'd love to see a sharp spike higher, so we can be comfortably
bearish from better levels.
Stock Index Futures Market Ideas
**Consensus:** Back and fill in the ES, was likely a reload. New
highs "should" be seen this week. We'll wait for better prices
to consider turning bearish.
**Support:** 1966, 1938, and 1889
**Resistance:** 2010, 2029, and 2036
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**
Buy Levels: 1975, 1970, and 1963
Sell Levels: 1992, 1999, and 2004
In other markets....
June 12 - Buy September mini corn futures near 440.
July 8 - Add on to mini corn scale trade.
August 1 - Roll October crude oil 95 put into the 100.50/91
strangle.
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.
;D :D
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