Investment Progress and Outlook

Despite my own cautions yesterday, the Nasdaq continued to transpire against the Dow and S&P, which prompted me to make a quick profitable trade.

As expected however, the Dow and S&P showed that most investors were awaiting word from the Fed. If there is news that a Fed cuts are stopping, then the market will react quickly and optimistically. However, if the news is that the Fed does not see any end to cuts, then the market will drop quickly. More likely though, the Fed will have a 25 bps cut with not much mention of the continuation of cuts.

I did also make one speculative move. I continue to hold my financial ETF, and I bought 5 Dow Jones Industrial average ETF contracts, in the hopes of positive news from the Fed.

The following is a new tracking sheet for my investments, which will better show my trades. I have also included other brokerage fees and added the prospect of taxes.

Go Go Fed

The Fed announced a 25bps rate cut today, which is great news, and the market was definitely looking for it. But, interestingly, the market in the 5 minutes after the Fed's announcement tanked. Why?

Hidden in its announcement was the indication that the Fed would most likely not cut rates in the near future, citing concerns with inflation (look at the high price of gas) and the overall stability of the economy.

So what are the plays for the rest of the week? Well, if you got a nice bump today, my suggestion is to sell 50% of your winning positions to lock in your profits, and then maybe wait until Friday to completely unwind. The market tends to take profits after these bumps, and you should do the same.

However, there is one stock I was buying today, CVS. They are announcing earnings tomorrow, and I would have posted this pick earlier, but I had completely forgotten about their earnings release date. But with the consumer goods report today being so good, its a great indication that CVS's earnings will also be amazing.

Here Fed, Fed, Fed...

Show me that rate cut!!

The markets are up a bit, but now the market has completely priced in a 25bps cut, which is what worries me. Once the market believes one way, and what is expected doesn't happen, there will be a HUGE drop. Conversely, if it does happen, the market will move a little bit.

This is a simple situation where the risk is high and the reward is low; a situation that is completely out of whack.

I am hoping for the best, but bracing for the worst tomorrow.

PS - End of the month is coming, and this month should see my networth move quite significantly, thanks to vacation time buyout from the old company, and sign-on bonus at the new company.

Market Outlook for the Week

The Fed meets Tuesday, and most of the market is awaiting a rate cut decision. Most believe a 25bps cut, although 50bps isn't completely out of the question. It's probably going to be the biggest factor affecting the markets this week.

On the one hand, with rising gasoline costs and the fear of inflation, the Fed may decide to keep rates where they are, on the other hand, and what most believe, the Fed needs to stimulate the market and the economy by loosening the credit markets, and a rate cut is exactly what it needs.

Total's trades net me $400+

As a short-term trader, one of the things I love are news events that are guaranteed to move the market in some fashion. Events such as those allow me to bet one or the other, and the leverage of options really allow me to profit off of those quick moves.

Today is a good example. I knew early today that the minutes of last month's Federal Reserve would move the markets. Traders and analysts would be scrutinizing every word to see if another cut was on the horizon.

Feeling optimistic, I bought 30 October 53 QQQQ (Nasdaq-100 Index) Calls and 15 November 54 QQQQ Calls, as well as 10 October 158 SPY (S&P 500 Index) Calls. Around mid-day, the calls were about even, but the market had been fluctuating up and down for a while.

Right around 1:30PM, 30 minutes before the minutes were to be released, volume picked up, and the price started to trend upward. After the news was announced, that all the Fed governors were unanimous on the rate cut decision, the Nasdaq actually went negative while the S&P continued upward.

I wasn't phased. It always takes a bit of time for the market to digest Fed news.

By about 3:30, the frenzy started, and both Nasdaq and S&P ended up, pushing my Qs and SPYs to, so far, a $414 gain. I expect another good day tomorrow, but I will sell off some to decrease downside risk. By Thursday, I plan to dump it all.