Archive Category: Wednesday Windfalls Alerts

Stock prices are down over the past five weeks … and that means volatility is up. Not only are stocks moving more — what we call realized volatility — but options traders are now willing to pay higher premiums for calls and puts, leading to higher implied volatility. The easiest way to see implied volatility is by looking at the CBOE Volatility Index (VIX).

Last week it was the Consumer Price Index, this week it’s the Fed meeting. Stocks just haven’t shown up in the bullish way they typically do on Tuesday and Wednesday. I mentioned on Monday how Fed weeks have been favorable 80% of the time this year. But that tendency didn’t show up this week. While stocks haven’t dropped dramatically since Monday, they haven’t popped higher either. One of our three trades, Mondelez International Inc., has traded a bit higher and given us a moderate profit. But the other two trades have fizzled.

Everyone’s waiting to see what the Fed will do with interest rates this week. After last week’s Consumer Price Index (CPI) report showed inflation is hotter than expected, the market is pricing in a greater than 80% chance the Fed will raise rates by 0.75%. That would have a big impact on the direction of stocks and bonds. But, as I said, it seems like the market priced in a lot of that move. We could see stocks climbing between now and the official announcement, much as stocks have tended to climb heading into the other five Fed meeting announcements this year. At any rate, I fired up my Wednesday Windfalls scanning system this morning — as I do every Monday — and I’ve found three individual stocks that are poised to pop, with favorable pricing to boot.

The August Consumer Price Index (CPI) print came in higher than expected, which led investors to believe there’s a higher chance of the Federal Reserve raising rates three-quarters of a point this month.

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