The Day After FOMC + Futures Trading Levels for Nov. 2nd

The Day After?

By Senior Broker, Mark O’Brien

General: 

Prior to this blog’s release, the Federal Reserve Bank’s Open Market Committee held rates steady at 5.25% – 5.50% for the second consecutive meeting, yet another indication that the global central bank rate hike cycle is coming to an end.  At the same time, Fed. chair Powell stayed on message by suggesting more rate hikes could be in the pipeline should inflation remain “sticky.”

Keep in mind that a favorite inflation gauge of the Fed is the quarterly Core Personal Consumption Expenditures Index (Core PCE), which last Friday recorded its eighth monthly decline in a row – down to a 3.68% YOY increase and the lowest reading since May 2021.

Energy:

If there was a fear / anticipation that the crisis in the Middle East would lead to extended physical supply disruptions for the energy markets, that fear – and crude oil prices – has abated in the last week or so.  After its initial ±$2.00 per barrel gap-up opening to ±$83.25 per barrel the Sunday after the outbreak of hostilities, Dec. crude oil spent two weeks reaching up to $89.85 intraday on Friday the 20th.  As of this typing, it’s trading over $9.00 per barrel lower near $80.00 per barrel, below pre-hostility prices.  Certainly without notice, the war could escalate.  Expansion militarily between the current parties involved, or in concert with expanded state or non-state participation including the United States, Iran, Syria, Hezbollah could inject a “war premium” into energy prices and extend to other commodities.

Risk: 

The point here is not to opine that this is the direction the conflict will go.  There are a range of possible scenarios for the Israel-Gaza conflict, from an expansion to a broader regional war to a negotiated cessation of hostilities.  There are parties and catalysts capable of steering the situation in either direction.

The idea is to caution traders of the potential for increased volatility and to suggest you approach your futures trading generally with risk-defined strategies, such as hard stop orders, option protection, hedge positions & futures and options spread applications.