Monday’s trading was largely uneventful. Volume was lower on both exchanges as normal Mondays go. We would prefer to see the market take a few days to consolidate its gains ahead of the next Federal Reserve Bank meeting. On Wednesday at 2pm we’ll get the release of the Fed’s latest statement and whether or not the central bank has decided to raise interest rates once again. Odds favor at least a 25bps hike. There is an outside chance the central bank goes rogue and raises by 50bps. We will see tomorrow, but consolidating ahead of time would have built a nice little foundation to continue this uptrend.
Summer trading is right around the corner and should begin soon. You know it is June when the Russell Rebalance happens and is slowly becoming the kick off to the summer trading session. We do not have any expectations on this market and while we would love to see this uptrend continue there is no telling what this market might do next. A sound risk management process helps tremendously in any market environment including light summer trading! If this summer is like the last two July should be a very good month of trading.
Wednesday’s Fed meeting will certainly kick up some market volatility. SPY volatility as measured by ATR (20) has declined since the end of January. TVIX had to reverse split again and UVXY is not too far from having the same fate. Market participants are expecting a higher level of volatility than they were at the beginning of the year, but with a 12-handle the VIX really isn’t expect too much volatility. As long as price action remains strong among leading stocks there is no reason why this rally cannot continue through July.
Be prepared for anything from this market. Despite a good possibility this uptrend continues we are not going to be caught off guard if this market turns south. Risk management is paramount. We wish you the best of luck this week.
