• Daily Game Plan – FOMC Minutes Spark Volatility

    by  • August 21, 2013 3:07 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 2 Comments

    MARKET CHECK

    Recent FOMC releases disappointed those looking for volatility on the news, but today’s minutes created a roller-coaster ride for traders.  Upon the initial release, stocks sold off sharply as some interpreted the text as “Tapering is coming.”  However, that woosh lower appears to be nothing more than a trap, as stocks reversed off those levels and are currently sitting at the highs of the day.  After being weak all morning, stocks are now well into the green, as the Nasdaq is leading markets higher, up 0.4% on the session.  While stocks have shaken off their weakness, bonds remain in the red for the day, down about 0.4%.  10-year yields continue to press higher despite the equity market interpretation of the FOMC Minutes.  Metals are higher after the news, with gold up 0.3% and silver over 1% higher for the session.

     

    CHART OF THE DAY

    Overstock.com (OSTK) – The online retailer has been very strong this year, more than doubling since January.  The shares recently gapped significantly higher on better-than-expected earnings and have since filled that gap.  This area could act as support going forward.  Despite its strength, sentiment in the options markets is near a bearish extreme.  This creates the potential for an unwinding of these bets, which could act as a tailwind going forward.

    I like a long entry here with a stop on a close below 29.50.  I would initially target a move to 33, with 36 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Despite today’s bounce, I still think the bears are in control until the SPX can retake 1675.  Long/short with no net directional exposure remains my preferred method of trading, as the market remains a stock picker’s paradise.  This could change should we see a significant selloff and correlations spike, but there are no signs of that being the case quite yet.

     

    About

    Bryan Sapp is a Senior Trading Analyst at Schaeffer’s Investment Research, where he has specialized in volatility-based options trading since early 2010. With Bryan at the helm, Schaeffer’s Volatility Trader generated a 2012 portfolio return of 70% for subscribers. This real-time option recommendation service exclusively trades short-term straddles. Prior to joining the research team at Schaeffer’s, Bryan honed his skills as a speculator by trading his own account, and playing poker professionally to pay his way through college. Bryan attended the University of Louisville, where he received his Bachelors in Economics and an MBA with an Entrepreneurship focus.

    http://www.schaeffersresearch.com/

    2 Responses to Daily Game Plan – FOMC Minutes Spark Volatility

    1. Brysapp
      August 22, 2013 2:30 pm at 2:30 pm

      That worked really well today. We all have slightly different views – IMO if we can’t retake 1675 in the next few trading days we’re going to see 1600 over the course of the next few weeks.

    2. rk
      August 21, 2013 4:56 pm at 4:56 pm

      Monday morning outlook had the advice to buy dips till 1640 range. We are there now. Is that analysis still applicable?

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