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Powell speaks, market craps

Although he said nothing spectacular, nothing everybody already knew (except maybe that everybody expected three interest hikes while he mentioned four) and market went on a selling frenzy again.

At some point this freaked me out a bit as my recently rolled SPX calls into puts got into trouble and I rolled them back into calls. But then I realized that it was all over-reaction. There still is absolutely no catalyst for a bear market out there. So I rolled it back into puts.

I increased risk a bit doing so, but now decided to sit still and do nothing until this crappy market moves calm down.

Today’s morning action and my trading reminded me of staying away from these market moves and reacting to them. It is difficult to do when your trade position is being attacked (in my case puts getting touched or in the money) but if the overall outlook is bullish, converting puts into calls is wrong just because the market is only freaking out.

So, I moved my trade back to what it was (happily collecting more credit) and now I need to sit tight and wait.


 · What investors missed – again?


First of all, the Wall Street reaction was based only on an assumptions of the same ones. Powell actually hasn’t said anything that he would increase the rates. He once again stressed data dependency and although we see economic prosperity and growth, according to Powell, it doesn’t pose an increased risk yet.

So his remarks can be seen positively and not negatively. The entire testimony pointed to lack of need to raise the rates! There was no urgency to do so. It was clear that FED would go forward and raise the rates only, if inflation starts moving in a faster and stronger pace. And that is not yet happening. Moreover, our inflation rate is still below historical average so any inflation growth will be returning to normal. Once the pendulum swings above the average we may see the need for FED to react.

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