Fed leaves rates unchanged, possible hike in December

Financials: Dec. Bonds are currently 15 lower at 157’21, 10 Yr. Notes 5 lower at 128’01.5 and 5 Yr. Notes 2.5 lower at 119’31.2. Yesterday’s FOMC meeting left rates unchanged with the strong possibility of a hike in Dec. which would be Data Dependent. “Data Dependent” being the new buzz words, which to me means full employment (under 5%) and inflation above 2.5 %(or there about). We remain long 5 Yr. Notes/short 10 Yr. Notes which has slightly narrowed to 8’02 premium the 10 Yr. I recommend taking profits if the spread continues to narrow to below 7’28 premium the 10 Yr. The long June 2015/short June 2017 Eurodollar spread has widened to 58.5 points premium the June 2015 contract. If you had multiple contracts and sold out of a portion of the long leg of this spread, I will note that I had recommended buying back those contracts below the 99.36 level, they are now trading at 99.325. I would like to add, one of the reasons I like these markets (interest rate instruments) is that one can treat the various instruments like chess pieces and think 2 or 3 moves ahead and try to keep some inventory and move the pieces (different expirations) around as the yield curve changes.

Grains: Dec. Corn is currently fractionally higher at 376’2, Jan. Beans 2’2 higher at 885’0 and Dec. Wheat fractionally lower at 505’4. I remain on the sidelines.

Cattle: Both Live and Feeder Cattle closed up the daily limit yesterday as cash bids firmed up. We have taken on short Dec. LC futures positions (we has recommended lowering protective buy stops to the 141.82 level or take profits below 141.40). We continue to hold the short 135/145 strangle.

Silver: Dec. Silver is currently 42 cents lower at 15.86 and Dec. Gold 19.00 lower at 1157.00. We remain long and continue to use rallies to resistance (above 16.30 in Silver and above 1190.00 in Gold) to take partial profits. The prospect of higher interest rates has a short term negative influence on the metals as investors will tend to move toward less risky investments with higher returns given the opportunity. I suggest being a buyer on sharp breaks (being ever the contrarian) as an eighth or a ¼ % rise in rates will not be an indication of a good return as yet.

S&P's: Dec. S&P’s are currently 10.00 lower at 2074.50. Yesterday’s reaction to the prospect of a rate hike in December was a break from the 2075.00 area to 2055.00 and then a rally to new recent highs in the 2085.00 area. I must admit that I am a bit dumbfounded by the rally and took a small loss, trying not to be stubborn. Treat as a trading affair between 2055.00 and 2085.00.

Currencies: I am on the sidelines.