WASHINGTON, March 16, 2015 – We got through the Ides of March without further Wall Street disasters, other than those that have already occurred during our wobbly first quarter, 2015. But this week’s trading might have a more wild and wooly outcome—one that, for all we know, may entirely depend on the quantity of adult beverages Federal Reserve hawks and doves put back during tomorrow’s annual St. Paddy’s Day debauch.
Wednesday is the day both sides have been dreading, as the Fed’s latest report, rumor has it, may very well provide some tea-leaves-style answers to the burning question, “Are they finally going to raise interest rates?” The market has been trading wildly in one direction or the other, with traders and funds alike trying to beat each other to a conclusion that nobody knows. Except maybe for those denizens of Goldman Sachs that may have read the oracle already.
All this alternating anticipation and dread in March markets is creating the kind of windy squalls we generally expect during this month anyway. Nature has been following suit, at least here in DeeCee, where it looks like it’s time once again to go out and fly a kite on the Mall—a joy once forbidden by law in the nation’s capital. (Gosh, what happiness isn’t forbidden by law these days?) In any event, flying a kite is a more useful activity than trying to trade the market these days, so maybe we ought to take a hint and have some fun for a change.
Actually, today has been kind of fun, at least for bulls. As of 3 p.m. Monday, we can tentatively conclude that traders and fundies are happy with what they think will happen Wednesday, as the Dow is up a robust 231 points, with the other averages doing just as well.
That’s actually a little unusual for Mondays, which, these days, are usually blue in the traditional sense. This either means we get whacked Tuesday and or Wednesday, or we don’t, assuming today’s active traders know something about the Fed that we haven’t yet divined. Take your pick. It’s a coin toss.
Our missives are likely to be brief until we get the latest Fed read on Wednesday. That’s because doing anything innovative right now has a huge chance to lead our portfolios awry, swirling away in a tsunami of red ink. If the Fed’s announcement is bullish (or interpreted as bullish), stocks are likely to skyrocket across the boards. In that case, we’d be sorry to be underinvested as we are right now because the tsunami might work the other way.
But if the Fed clearly telegraphs it’s moving interest rates upward sooner rather than later, stock market investors will quickly feel that they’ve been run over and flattened by a herd of raging bulls à la Pamplona. It will not be pretty.
Today’s trading tips
None, really, save to mention that, sensing today’s market would get some juice from somewhere, we dumped our rather large position in the VIX ETF (VXX) we’d been using to protect our main portfolio. It was a good move, too, as that ETF has been hit too hard today and it would have made our hedge a liability if we’d continued to hold it through the trading day.
The way stocks are going, however, we may need to lay on some VXX once again. If the Fed plays conservative (in terms of raising interest rates), we’ll want to head for a fallout shelter after doing that. Otherwise, who knows?
Which is exactly the Maven’s point today. If we don’t know what we don’t know, it’s best to hold off on new stock commitments until we can see something through the data fog that’s been billowing out from Washington over the last couple of weeks at least.
See you tomorrow.