Bulls remain ‘fed up’ in front of this afternoon’s FOMC decision. As of 11:55 ET the SP-500 (SPY) is up a modest 0.10% in less shy, continued testing of unlimited upside and sterilized bearish historical tendencies.
All eyes are on today’s decision on interest rates and more importantly, a policy statement which bulls hope will include an outside chance of fresh monetary action or at least language moving beyond the current and long-standing, “ready to act if necessary” promise by the FOMC.
Across both ponds, news has been lighter and generally mixed. For the bulls, Dutch PM Mark Rutte retained his post and in the process, allowing pro-European factions a victory. Also, China’s Commerce Minister stated retail sales growth is expected to rebound in the coming months.
For the bears, Germany’s vocal of late Finance Minister doesn’t believe the ESM can obtain a banking license and noted the financing of states isn’t part of the ECB’s mandate. And for those neutral-minded hedge hogs, Switzerland, kept the peace so to speak by maintaining its rates as expected.
Stateside, a couple reports on weekly claims and producer prices missed views but failed to dissuade investors to react with any authority one way or the other. Filings for the week ended on September 8 showed an increase of 15,000 to 382,000 and well above forecasts calling for a modest rise in those ranks of just 2,000 to 369,000.
Separately, producer prices rose by a sharper-than-expected 1.7% versus estimates of 1.2%, though core prices which axe food and energy showed a more modest and in-line increase of 0.2%.
In those intertwined markets of influence, the EUR/USD is off 0.25% dictated by technical profit-taking following a swift and likely overbought multi-day move through key resistance. Tied at the hip, Eurozone country ETFs (EWP, EWI and EWG) are off 0.75% to 1.5%.
The Global X FTSE Greece 20 ETF (GREK) is under the most pressure with profit-taking of about 3.25%. Thursday’s price action comes as little real surprise given the proxy’s Herculean technical lifting act the past several sessions and word from a senior IMF official the country will require a third bailout package amidst ongoing negotiations with the Troika.
The US Oil Fund (USO) is displaying relative strength with its gain of 1.05%. Technically, today’s bid sets up a breakout challenge of four-week consolidation highs and the 200SMA. And after a multi-day dip resulting in seven sessions of lower lows into a test of its 200SMA, the 20-Yr (TLT) is finding support to the tune of about 0.80% in front of the Fed.
Investor sentiment is mostly flat with the VIX ($VIX) trading near 15.75% and wedged just below its 10 and 50SMAs for a third session. The euphemistically called Fear Gauge is continuing its attempt to diffuse Monday’s short and longer-term complacency signals which saw a 10SMA differential in excess of 15% and the spot within one point of its August and five-year lows while striking nominally cheap historic levels.
Finally and in those sometimes accurate heat-seeking option markets, it appears a bull has built a home for the long run in Pulte Homes (PHM). This morning and with shares narrowly extending their four-year highs by about 0.90% and after running more than 350% over the last 11 months, an opening January 14 vertical placed on the 15 and 25 calls was executed for $2.80 on 15,000 contracts.
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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