Volatility Created When She Speaks – Don’t Trade If You Can’t Parse

Trading is not like the old days, information, analyse, act and react by a human brain.

It is about PARSING and analysing the number of times the word “inflation” appears or “bubble” and computer programs do that in split seconds after the FOMC statement is released. Sitting around and waiting for someone else’s parse results and analysis results in the FX moves we saw last night of Ups and Downs.

Thus I waited for the post FOMC conference and it was the combination of parsing and Yellen’s words and body language that made the difference.

Interest Rates
Yellen says to expect economic growth strength but the long term economic outlook is NOT and that is why the long term rates are lowered to 3.75% (vs 4%) but the short term rates have been revised higher to expect 1.2% (vs 1.125%) for 2015.

Stock Market
No bubble.

This is the one to note because Yellen noted with concern that low volatility  “may induce risk-taking behavior that entails excessive buildup in leverage or maturity extension” and it can “pose risks to financial stability later on.”

Really, what else can we expect from a central bank ?

To panic the markets is the last thing on their agenda. They are just doing their job there and not responsible for the profits and losses caused by their actions.

The conclusion of the FOMC is DOVISH and we will have to wait for the  next market moving event which is the FOMC minutes released on 10 July for another reason to rally.

Stocks and 10Y US t-notes moved in unison, the USD strength waned, the VIX crashed and Spain is out of the World Cup and I was dead wrong about how it would turn out so faR. https://tradehaven.net/market/fx/weight-of-the-world-cup-on-the-fomc/

Meanwhile, an outrageous new APP for the phone that took just 8 hours to programme and design with one sole function to send out the word “YO”, has managed to raise 1 million in funding. They are safe because they are not in the FOMC’s radar ?

Questions are swimming in my mind. What is the end goal of the FOMC ? When will things get good enough if it is not good enough now ?

Reading through the parsed words, “uncertainty” was mentioned more than others in her Q&A session which really means SHE DOES NOT KNOW.

I will hold on to my trades , 1. short 10Y UST futures at 124 for a short term trade, 2. buy the DXY to target this year’s high of 81.30 and 3. sell Aug calls on the Russell 2000 index, before the rest of the world finds out.