Last week I mentioned how all eyes would be on
the FOMC meeting and the press conference
that followed it.
As it turned out, I was accurate when I said that
the Fed will not raise rates anytime soon.
And that is what happened.
However, the price action last Wednesday was
anything but boring.
Going into the meeting, the S & P 500 was down about
13 points. After the announcement, the market rallied
about 45 points on the news.
This type of move was typical back in the day.
As of late, these days have been rather tepid.
But it shows you what type of potential there is on
The question is how do you take advantage of it.
Of course, you could have bought ATM calls on the SPY.
The ATM calls were about $1 and ran up to over $4 in
the span of 2 hours.
If you did not want to trade it directionally, a straddle
would have worked out well.
With the straddle, you would buy both the call and the put.
As long as one side moved further than your total cost,
you make money.
Last week, I also proposed the question of who can
beat Kentucky in the NCAA tournament.
Actually, they had a tough game against Cincinnati.
They gave them fits for most of the game, until
Kentucky pulled away.
Personally, I think that game showed that Kentucky
can be beat.
Wonder who can do it?
Back to the markets.
Now that the Fed announcement is behind us, what is
next for the markets?
Well for one, I do think the S & P 500 hits 2,125.
Actually, as I write this, it is within 10 points of it.
But, there is one thing that concerns me at the moment.
That is the VIX. The VIX hit a low Friday of 12.54.
There is VERY strong support at the 12.50 level.
In fact, if you go back to a daily chart of the VIX,
you can see how many times the VIX spiked up
in the last two years when it got down to that level.
Will this time be any different?
I don’t know, but maybe.
But maybe not. But, it is something or you to be
Watch the VIX and you can trade based on what it does.
I hope this has been helpful.
Until next week, trade safely.