Fed Day, Get Ready for Some Big Moves in the Markets

The Fed plans to announce its decision on interest rates and monetary policy later today. The U.S. central bank is not expected to announce an interest rate hike today but the question will be when it will happen next.

We’re sure the Fed will offer language today that gives the central bankers some flexibility but they seem to be focused on more rate hikes this year. Will the next one be in April or in June? It is clear that the global markets are not taking this tightening cycle well.

We saw the big correction begin just after the December meeting when the Fed moved rates a quarter point. Now that stock markets around the world have recovered, another wave of selling could develop if the Fed’s decision is a surprise.

We continue to hold positions that are taking advantage of short-term moves in the markets. We expect oil to continue to rally, long-term yields to rise and gold to correct. We are eyeing a short-side trade depending on how the market moves after the Fed’s meeting. We will not be establishing any new positions ahead of the 2:00 pm EDT announcements. Expect more action signals later this week.

With the Fed meeting in front of us, we are confident that the markets will rethink their treasury position. We remain positioned with the TLT April $128 puts to take advantage of this pullback.

We currently own GDXS with the GDX April $18 puts. We continue to believe in and are starting to see evidence of a pullback in gold stocks.

We also own USO with the June $9 calls. Oil continues to firm up and while it will not last, we are enjoying the tailwinds and profits.

Russia is a heavy oil exporter that will continue to benefit from firming oil prices. Thus, we remain confident in our long RSX position and our RSX May $16 calls.