So How Do We Trade The Markets Now?
In an amazingly short amount of time, the financial markets appear to have stabilized. It was shaping up to be a very tense month of February, with several catalysts capable of roiling the market.
Somehow though, the past week or so has gone more smoothly than many could have imagined.
First off, the biggest (potential) market-moving event of the month was supposed to be the debt ceiling debate. Many were expecting another last minute, short-term debt ceiling hike with neither side able to gain any ground.
Instead, Congress actually got its act together and passed a clean debt ceiling bill a good two weeks before the deadline. Moreover, the debt limit has been bumped high enough to cover all the way until March 2015.
In other words, it’s no longer an issue this year.
What’s more, it looks like the Fed is going to keep doing what it’s been doing. According to new Fed Chair Yellen, bond buying is going to continue as long as needed. And, tapering may not be guaranteed depending on the economic conditions.
Yellen effectively ended any concerns she would alter Bernanke’s easy money policies. We can expect the Fed to continue to be as accommodative as needed – another positive for equities.
Finally, earnings seasons has pretty much come and gone. While there were some surprises – both positive and negative – the period mostly went off without a hitch.
So now what do we focus on?
Well, to be concise, the economy is what we need to pay attention to in the coming weeks.
Winter weather has hurt job growth, retail sales, and homebuilding. We’re going to need to see a relatively quick recovery from arctic conditions (once they end) in order to be assured the economy is still on track.
Over the next couple months, economics news is likely going to be the biggest market mover. That includes news from overseas markets as well. However, the domestic economy is the primary focus.
I believe the news is going to be mixed and the market is going to remain range bound for the time being. As such, it could be a good time to write covered calls – especially on dividend stocks. It’s a good, safe way to increase your returns in a choppy market.
Yours in Profit,
Gordon Lewis
Category: Options Trading
