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Investors seem to be unwilling to be "too long" ahead of the FOMC announcement scheduled for tomorrow afternoon. Even a sharp drop in crude oil wasn't enough to deflect negative sentiment. Early morning data brought inflation concerns back to the forefront but Fed comments made tomorrow could quickly change the tone of trade.
According to the Commerce Department, an inflation gauge tied to consumer spending rose by a sharp .8% last month as a direct result of higher prices at the pump. The increase was the biggest jump since February of 1981. Crude oil closed down $3.69, nearly 3% on the session and leaves the price of crude approximately 20% off of its peak set on July 11. Lower energy price during today's session did ease some inflation concerns and spark some short covering and maybe even long players near mid-session but with the FOMC up to bat investors are somewhat skeptical of being long equities.
The Fed is expected to take no action in tomorrow's FOMC meeting as they are attempting to straddle slow economic growth and inflation woes. If the Fed does in fact sit on their hands, the target Fed Funds rate will remain at 2% leaving the prime lending rate for consumers and businesses at 5%. There is a delicate balance in that taking action to alleviate one will flare up the other. According to Sung Won Wohn, an economics professor at California State University Channel Islands, the Fed "...is caught between a rock and a hard place. The Fed will stand pat."
Terry Connelly, dean of Golden Gate University's Ageno School of Business, the economy is "moving from pneumonia to anemia.". Accordingly he believes that the Fed can't afford to boost rates to fend off inflation. He added, "It is not yet time to prescribe a sedative"
Today's trade may have eliminated the possibility of a retest of the highs without first reaching the lower end of the range. Luckily I have recommended to be on the sidelines and will stay there until an opportunity arises.
Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.
S&P Futures and Options Recommendations...
**There is unlimited risk in naked option selling and futures trading Position Trade - Flat Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.
Dow Futures and Options Recommendations...
**There is unlimited risk in naked option selling and futures trading
Position Trade - Flat
Please note: A mini-Nasdaq chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.
NASDAQ Futures and Options Recommendation
**There is unlimited risk in naked option selling and futures trading
Position Trade -
August 1 - If you took our advice, you would be long the September e-mini NASDAQ 1670 puts for about 20 points or $400.
Carley Garner
Market Analyst
info@carleygarnertrading.com
www.CarleyGarnerTrading.com
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
