'Ol Four Eyes
By Todd Harrison Aug 12, 2003 3:01 pm
May peace be with you!
I planned each charted course
Each careful step along my way
But more, much more than this
I did it my way
The much awaited FOMC decision is released and the crowd takes a nothing done. Elmer's dialogue was mixed as he attempts to simultaneously appease both the equity and fixed income markets. Will the balanced text be enough to keep him atop his thin tightrope? It's too early to tell (one hour does not a market make) but thus far, there's a green sheen from my eight screens.
As discussed, I've done a bit less today as I've got my positions on and await my price. Typically, after an FOMC announcement, the real money doesn't get involved until (at least) the next session. I don't expect this go 'round to be any different although there wasn't anything earth shattering in the text. The tone of the jaw bone isn't the issue here--the ability of Elmer to convince the markets he means what he says is. In this game, credibility is everything.
That said, there have been a couple of developments in the late afternoon action. The BKX, for one, is poised to close (marginally) above it's 50-day moving average and that warrants a mention. The breadth has also impressed as there are two winners for each loser on the big board. Finally, the Dow Jones is inching ever-so-closer to the upper band tag of its recent range.
Not much has changed from my vantage point and I've been using the liftage to make some discipline scales (both ways). In other words, I've added puts to my core holdings (as a function of price) and I've let go of some long exposure that's up nicely. At the end of the day, I agree with Professor Succo that vols are too cheap and paper (particularly in the financials) makes a ton of sense.
One last thought before I scoot. On FOMC days, the first move is typically the false move so please be on your toes for a potential reversal. The financials have held their bid all day and that bodes well for Hoofy. However, with liquidity this thin, it's quite possible that he takes a turn for the worse. Regardless of your posture, appreciate that potential.
Have a peaceful night.
No positions in stocks mentioned.
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