I have come to a simplistic conclusion that the Federal Reserve will not allow the market to fall, come, rain, shine, or even inflation.
They will engineer whatever scheme they may need in order not to let that happen. I believe the Fed (or the government itself --yes, I know they are supposed to be independent from each other but...), view the stock market as the perfect "pension/social security system" for the American People. This solves the problem of potentially the government not having the funds to cover the obligations towards the Social Security liabilities they have coming.
In addition, they will never implement (or it will be delayed), the privatization of the Social Security program, as some have suggested. Yes, that means the government continues to collect on FICA taxes. cash flow, cash flow, cash flow... (even if they are inflated or devaluated).
Perhaps the above is too simplistic... but what other explanation can there be to the reaction of the market ? An orchestrated buy at all costs strategy by the major brokerage houses ? (with an assist of the Fed) I doubt that. Then again, why were futures limit up yesterday (and today) ?
Another point is... everyone was expecting for the US Dollar to weaken, and then this would cause further weakness in the US dollar denominated assets... well... with lower interest rates, this will make the dollar weaker... or... ? does this mean that the fact that the other currencies ARE already weak and getting worse (the Yen and the Euro), this allowed the Fed to lower rates... Or... they want to stimulate exports by making the dollar weaker, and so US products cheaper ?
All I can go by is what the market actually does, the above are mere speculations... wild guesses -g-
Does this market will turn around on a dime and go lower ? maybe in the near future, but for now, it looks it has enough fuel to go higher for a while... (short term say 2 months --but I really do not know).
For now...
I took a look at the charts and after the Fed cut... I decided to do a bull spread (sold put, bought protective put) on ADBE filled at the close (since I added .10 to the "natural credit" (5 point spread July 35 & 40).
The idea is to take advantage of the momentum (for now). With futures limit up it looks good... if it retraces, It may give me a good entry point for ADBE (plus premium received on the short put and a profit on the protective put. limiting my loss in case ADBE --or the market tanks).
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For a historical listing of CBOE Market Statistics Summaries, visit the following web address:
cboe.com
CBOE Market Summary for 04/18/2001:
Put/Call Ratio: .51
VXN OPENING VALUE: 73.16
VXN HIGH VALUE : 75.00
VXN LOW VALUE : 67.45
VXN CLOSING VALUE: 69.71
VIX OPENING VALUE: 28.93
VIX HIGH VALUE : 31.40
VIX LOW VALUE : 26.23
VIX CLOSING VALUE: 28.45
EQUITY OPTION
TOTAL EQUITY CALL VOLUME : 1,550,513
TOTAL EQUITY PUT VOLUME : 617,019
TOTAL VOLUME : 2,167,532
INDEX OPTION
TOTAL INDEX CALL VOLUME : 232,392
TOTAL INDEX PUT VOLUME : 295,143
TOTAL VOLUME : 527,535 |
