Today is the Fed day, a day when after the FOMC meeting, the Fed releases its policy statement. Today is also the first press conference of Janet Yellen as chair of the Fed. But regardless of it being Yellen’s first meeting, Fed day provides a gold mine of trading opportunities, provided you have a plan in place.
Today is one of those rare times when it is not going to matter much to both the stock and the bond markets as to what the Fed says. The trading will be mostly dominated by the technical mechanics. Let us start by taking a look at the annotated chart.
Click here to see the annotated chart.
The chart shows two ETFs — the SPDR S&P 500 ETF Trust SPY and ProShares UltraShort Lehman 20+ Year Treasury TBT; this is a convenient trading proxy for interest rates.
On Friday, March 14, 2014, stocks were swooning and bonds were rising ahead of the weekend referendum in Crimea, a region of Ukraine. The fear was that Russia would annex Crimea, and the West would respond with major sanctions. Stocks were swooning due to the prospect of global geopolitical turmoil. Treasury bonds were rising (the TBT was falling since it is an inverse ETF) as investors were rushing into the safety of U.S. Treasurys.
The chart shows when I made unhedged clear calls to buy U.S. stocks and short bonds. With the benefit of hindsight, both calls have proven to be spot on. Now the short-term move from that call is over for both stocks and bonds. The real question is what is next, especially in view of the Fed policy statement…Read more at MarketWatch
