Semantics

OK, guess what, I was wrong the on the change in wording (#9 from my last post). They made a few minor changes, but to be honest it is window dressing and it feels like they (the Fed) is trying to tip-toe around the markets.

 Here are the highlights that I enjoyed:

LABOR MARKETS
    January: "The deterioration in the labor market is
abating."
    March: "The labor market is stabilizing."
  
ECONOMIC CONDITIONS
    January: "Household spending is expanding at a moderate
rate but remains constrained by a weak labor market, modest
income growth, lower housing wealth and tight credit."
    March: "Household spending is expanding at a moderate rate
but remains constrained by high unemployment, modest income
growth, lower housing wealth and tight credit."

DISSENT
    January: Kansas City Federal Reserve Bank President Thomas
Hoenig dissents, arguing that pledge to keep rates at
exceptionally low levels for an extended period is no longer
warranted.
    March: Hoenig again is the only Fed official to dissent

Nothing changed... well, I take that back. The outrights shot higher and the spreads conversely collapsed.

Points of interest:

• The Fimat desk continues to sell 50/56 and 56/62 put stupids in November. They also have started buying the 68/75 and 68/81 call spreads. IN MY OPINION: This is almost an identical trade to the one they executed at the end of last summer. Obviously, I have no idea what they had against it (the earlier trade) as a hedge, but if it was a stand-alone Fed Funds trade, it could have grossed a whopping 35mm. (notes from 2/28). 
• The long end of the yield curve (30s) has experienced a "volocaust" in terms of the options markets. The 30 day moving average of the underlying (USM10) is tracking around 7.5% and the options are equally as cheap. It is probably about time to get long June or September volatility. 
• I spoke with a few Energy traders this week. They all told me the same story in slightly different terms. After a really rocky '08-'09 for the Natural Gas vs Crude Oil trade, a lot of traders jumped back into it at the start of 2010. Everyone was betting long NG (because it was cheap) and short $80 Crude. However, the rise in Crude and the collapse of Natty has been a costly trade. In order to cover their losses, they've simply sold their long Nat Gas and sold more Crude short. Eww, sounds like a painful to me. (Crude is up almost $2 as I type this)
• The SPX has broken all resistance lines and is headed to 1175. I'm indifferent but need to cover some cheap puts around the 1115 line
• The NOB is at 94 bps. {aka "no man's land"}
• The Dollar looked horrible today... and the 'impending news' about Spain has never materialized
• EC continues its bullish run back towards the 1.40s. If you look at the chart on a 1-day time interval, it appears to be building the foundations for a firm support line around the 1.35-1.36 area. 

Until they're all winners, trade away.
~LH