Weekly Market Assessment
The Federal Open Market Committee, also known as the FOMC (which I have referred to in many previous assessments), can, as of recently, be renamed as the Federal Open Mouth Commitee! Why? The Federal Reserve Committee consists of 12 Regional Bank Presidents in which each provide their ideas as it pertains to monetary policy within the economy. Some agree with the current status (keeping rates lower for longer) and some disagree (raise interest rates sooner). With that being said, these Presidents, when outside the realm of the committee meetings, have become more vocal in the media with expressing their opinions. How can can you test/feel a market out when thinking about changing monetary policy without actually changing it? So we ask, how does the market respond when a member says "Interest rates have been too low for too long and need to be raised"... and "We need lower rates for longer"... Through this, the FOMC is able to gauge the liquidity in the market and understand how to approach future monetary policy decisions without disrupting market efficiency.
As we again enter new all time highs across the markets, the worry of higher interests rates adds a little uncertainty as to how the market will handle it. The timing of the rates has been the most recent topic of discussion. Will it be in June or September... or maybe the first of next year? I go back to the Federal Reserve's mandate that inflation must be at or around 2% to satisfy a hike in interest rates. We are no where near this and for this reason I believe rates will remain lower for longer! The Fed wants to avoid deflation at all costs, meaning interest rates will remain low until we see a pickup in inflation. The Fed Presidents will remain vocal to test the market as we continue to tread into unknown territory, where bubble talk and market collapse continue to scare investors, all the while the market enters new highs! We have seen an incredible move in the market over the past few years and with each correction, fear enters investors minds restraining them from stepping in and buying. As mentioned numerous times before, a secular bull market can run for many years, and being left behind creates anxiety which leads to undisciplined bad decision making, aka buying high and selling low. I will leave with one last acronym, which explain this theory very simply... "FOMO", The Fear Of Missing Out! The Rant: Going Off on a Tangent with My 2 Cents:
Making the Watchlist: Below are the stocks that I will be looking at over the coming months. I will provide the the current stock price and why I am watching them. I will comment on them as I continue to keep an eye on them. You will be able to see and follow their growth and/or decline. Chart links may be attached.
Virtu Financial (VIRT)$22.14- operates as a market maker and liquidity provider to the financial markets worldwide. The firm completed 5.3 million trades a day last year. It makes markets in more than 11,000 securities and other financial products, trading on more than 225 exchanges in 34 countries.Over the past 3 years since filing for an IPO, this market marker/high frequency trading firm has had only one day where it suffered a loss in trading. With a potential new venture in the every so growing China equity market VIRT could see huge upside into its net trading business. VIRT also acts as a hedge when market become volatile as it has the ability to smooth a market out and make it more efficient.
See What I'm Trading:You can now view all my real-time trades by following this link, BlackPacific Capital . This new site shows my trades, in real time the minute they are bought and sold. Below you can also click on the stock symbols, trade strategy or prices which will lead you to this new site. The site offers a full risk/return profile and video detailing the strategy of the trade. Note: When looking at the option positions every contract equals 100 shares.
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk:
S&P 500 (SPX) -No Trades
SPDR S&P 500 EFT (SPY)- I have bought a 214 "PUT" for next week as the market seems to have found resistance at this level.
Twitter (TWTR)- After a major screw up in announcing their earnings and not pre announcing that they would miss on major metrics the stock sold off huge more 25%! This seems to be over due with the amount of market cap lost in this missed earnings report. I have purchased MAY $35 "CALLS".
Taser International (TASR)- WIth the recent rioting and police issues in Baltimore, TASR has gone from $27 to $35. I believe this has gone to far too fast and is overvalued. I have bought MAY $35 "PUTS"
Alibaba (BABA)- I purchased a weekly "CALL" Spread at $75/79. After BAB reported its earnings on Thursday the stock rose ~10%, allowing my option to be sold for 36% gain.
FireEye (FEYE) -I bough a JUN1 $42.50 "CALL"