FOMC Minutes – Nothing New. Traders Are Searching For News. Cash Is King

May 21, 2014
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET (Market Open) - Last week we were close to a short squeeze but the market breakout failed. The SPY fell back into its trading range and we are heading into a news vacuum. The jobs report is more than two weeks away and the next Fed meeting is a month away. The SPY will trade between $183 and $189 for at least a few weeks. Earnings season is winding down and retailers are reporting dismal results. I am not seeing the pent-up demand that analysts were predicting. Interest rates are near historic lows and money will flow into equities due to a lack of attractive investment alternatives. If the market gets ahead of itself we will see profit-taking. Stocks are not cheap at a forward P/E of 16. Buyers and sellers are paired off and that will keep us in the range. Signs of pent-up demand could force a breakout, but that is more and more unlikely as we distance ourselves from the polar vortex. A sharp decline in China's economic activity could force a breakdown especially if accompanied by shadow banking defaults. This scenario is more likely, but we need evidence. We've had plenty of "Fed Speak" in the last few weeks. We know that tapering will continue and that they will leave room to pause if economic conditions deteriorate. I'm not expecting anything new from the FOMC minutes today, but the release could still spark a reaction. Traders are looking for anything to sink their teeth into. In light pre-holiday trading, even a small bid can move the market. Tomorrow, flash PMI's will be released. On a global basis I am expecting stable, but sluggish growth. In light volume, this will be a market moving event. Don't look for a sustained move in either direction. This is a very low probability trading environment. I am day trading and I am selling some out of the money put credit spreads in the tech sector. I am focusing on stocks that have been badly beaten down and have formed a base. I am keeping my size small and I want to generate a little income during these doldrums. Look for dull trading the rest of the month. Keep your size small and try to sell some out of the money premium. . . image

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