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.
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.