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Hike Just Too Predictable to Move the Market

As has been said previously, the only real shock to the market today would have been if the Fed didn’t raise rates. But they did...for the third time in the last 18 months. They also shed some light on the plan to unwind their massive balance sheet. Given how expected this quarter-point rate hike was, it was almost a non-event and allowed the major indices to go their separate ways on Wednesday. 

The Dow reached another new high in the session with a gain of 0.22% to 21374.6, but the S&P declined 0.10% to 2437.9. At one point, the recently-beleaguered NASDAQ had slipped by about 1%, but a late-day surge helped reduce the loss to only 0.41% to 6194.9. “Quite frankly, I’m not bothered by today’s modest red arrows in some of the indices. Especially the S&P as it gave them a chance to fill in a gap that was left on the chart after yesterday’s higher open,”, said Kevin in Options Trader, which made two buys today (see below). 

In addition to OT, there were also buys from Reitmeister Trading Alert and Momentum Trader, as the portfolios were more active today than on Tuesday. Give it all a look below: 

Today's Portfolio Highlights:

Reitmeister Trading Alert: Shares of Anixter Int’l (AXE) jumped as high as $88 after the positive earnings surprise in its most recent quarterly report...but shares have since pulled back. Steve sees a “ripe buying opportunity” with this leading cable and connector supplier, so he added it to RTA on Wednesday with a 7% allocation. In addition to the value aspect, AXE is also a Zacks Rank #1 with a Zacks VGM Score of A. The editor believes this company could get up to $90-$100 if the PE cooperates. Read the complete commentary for a lot more on this new addition. 

Momentum Trader: Dave has been looking to take advantage of the recent tech selloff, but didn’t want to buy any chips since the portfolio already has enough exposure to the space. His solution was to pick up QIWI (QIWI) on Wednesday, which is a next gen payment provider with an integrated payment network in Russia across various channels. The editor says this stock has been “absolutely en fuego”, as it breaks out to new highs on strong momentum. The full write-up has more on this new pick.

Options Trader: Biotech is a very explosive space that can be fantastically lucrative when its up and a catastrophe when its down. Kevin is betting that we’re in one of those fantastic times with S&P Biotech ETF (XBI), which is in a very well defined bullish ascending triangle pattern. The editor thinks the fund is in the midst of a breakout, so he bought to open a Sept 73.00 Call in XBI.

AbbVie (ABBV) is actually a part of XBI, but Kevin thought it was a standout that deserved special attention. Therefore, he also bought to open a Nov 70.00 Call in this global research-based biopharma company. This stock is in a bullish ascending triangle pattern as well. Plus, its options are inexpensive. Get more specifics on both of these moves in the complete commentary. 

Surprise Trader: "And as largely expected, the Fed raised interest rates again, putting the benchmark Fed funds rate to a range of 1%-1.25%. The Fed also put out some initially commentary regarding how it will wind down its massive balance sheet. According to Business Insider , the Fed looks to start the process with a ‘roll off’ of assets by not reinvesting the proceeds. They will start with $6 billion in Treasury bonds and $4 billion in MBS on a monthly basis, eventually expanding to $30 billion for Treasury bonds and $20 billion for MBS. 

"The Fed remains light on the specifics when it comes to timing, and some investors are starting to question the Fed’s commitment to future rate hikes. Sure, unemployment is low, but there has been no pressure at all on the inflation front and wage growth remains non-existent. We are now over 50% for the CME Fed Watch for December when it comes to bets that the Fed will stay at this level, so most aren’t buying that a hike will come in the near-term. I think most will want to see some inflation first before adjusting this prediction! -- Eric Dutram 

All the Best,
Jim Giaquinto

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