Fed’s Statement is Slightly Hawkish at Best

The Fed issued its statement today and left the rates unchanged with no direct hint about an imminent hike in September or in the future.

The only real changes in the statement came with the addition of wording that “near-term risks to the economic outlook have diminished,” while one Fed official actually favored a rate hike. Market participants were looking for the inclusion of a Fed comment about the need to balance risks but none appeared in its statement.

We believe the real takeaway from this statement is that the economy and labor markets are getting better. The August employment number will be an important confirmation of this belief.

While we didn’t get a hike today, this does leave September’s meeting as a definite possibility for one. More importantly, while the dollar and yields have seen some volatility since the announcement, we believe the strong economic backdrop and a handicapping of a September rate hike leave room for both the U.S. dollar and rates to move higher and thus benefit our open positions.

This morning, we issued a special alert to sell ProShares UltraShort Bloomberg Crude Oil ETF (SCO). Based on the time the alert was issued, you were able to realize a 30% gain. That is not bad at all for an exchange-traded fund (ETF) transaction. If you haven’t done so already, please take this opportunity to sell the position. After notching consecutive record highs, over the last two weeks the equity market has begun to consolidate and digest the recent gains. We continue to see the potential for a pullback. As a result, we will hold out for better prices to cover and/or sell our remaining positions. Moreover, with the Fed statement behind us, we continue to see opportunities in the ETF and options markets to make some profitable trades as we enter the historically volatile late summer and fall months.

Sincerely,


Doug and Tom