Fed Minutes Reaction

The Fed minutes didn't reveal anything new.  And it shouldn't really mean much, because it was Yellen's minutes, and she's no longer the boss.  What will matter much more for this market will be Jerome Powell's first FOMC meeting in March, and that is where the uncertainty remains. 

It is the reaction to the news which is meaningful.  Investors were waiting for the Fed minutes to sell.  Or they just delayed their planned sales till after the Fed minutes, no matter what.  This is why you often see a rise ahead of the Fed meetings announcement during the day because those who wanted to sell ahead of the meeting usually did so the previous day or even earlier.  Sometimes you have investors who want to wait till after the event before buying, like what happened with the CPI report last Wednesday.  But this time, the market was very complacent and viewed the Fed minutes as a opportunity to sell into, not buy in to.  And thus the big selloff afterwards. 

I was hoping for a bit stronger rally to short into this week and it just hasn't happened.  It got close to my short target zone of 2750-2760, but barely missed it before plunging.  Rarely do you see such a big move on a Fed minutes announcement, but this market is a nervous market, and it saw the bonds selloff and followed that market almost tick for tick.  At this point, I don't know if I will be able to get a low risk short opportunity before the market bottoms, so I will change my approach to looking for a low risk buy opportunity in the coming days, if the SPX can get to 2640.  I know that's a long ways away, but its possible in this jumpy market.  What I do doubt though is that we'll see a big move down to 2540 to retest the lows.  I don't think the bond market will stay weak enough for that to happen.  The 3% 10 year stands as a very tall barrier and it looks like bonds are stabilizing at current levels and reluctant to go much lower. 

Ever since the CPI number came out, the put/call ratios have been coming in fairly low.  Yesterday was also low, despite the late day plunge.  It seems like we need to shake the tree at least once or twice more before the V bottom players throw in the towel and the market can bottom and sustainably rally higher.  At 2705, the market is right in the middle of my new range, 2640-2760, so not much edge here.  Waiting for an overreaction towards either side before putting on a trade.