Yesterday afternoon the stock market saw Fed Chairwoman Janet Yellen and the rest of the FOMC effectively pour a hefty dose of water on what’s been increasingly looking like a floundering market. In this week’s Monday Morning Kickoff and in yesterday’s Tematica Investing, we’ve ticked off the growing number of concerns that have led Wall Street bulls to become skeptical, if not downright bearish… and that was BEFORE the latest round of Fed FOMC minutes.

Those minutes hit yesterday afternoon, and based on the stock market’s reaction — a 25 point or 1 percent drop in the S&P 500 — a casual observer would think the Fed had set a firm timetable for boosting rates. What the always upbeat Fed said, however, was an interest-rate increase in June was just possible if incoming data showed an improving economy.

The two key words in that statement are: “possible” and “if.”As we’ve seen from much of the recent data, the likelihood of that is rather low. 

While the headline figure for this week’s April Industrial Production was better than expected, the upside came almost entirely due to a surge in Utilities and a modest improvement in manufacturing. Before one gets his or hopes up, the utilities index spiked 5.8 percent as demand for electricity and natural gas returned to a more normal level after being suppressed by warmer-than-usual weather in March. Hardly something that points to a sustainable improvement in the industrial economy. Deep misses in both the May Empire Manufacturing and May Phill Fed Index do not point to a pronounced rebound in domestic industrial economy.

On the inflation front, much as made about the “hotter” than expect April CPI figure of 0.4 percent. Let’s remember through, the CPI figure includes both gas and food. In the last month alone, we’ve seen gas prices jump more than 10 percent given the continued lift in oil prices. Examining the core CPI reading of 0.2 percent for April, well it was inline with expectations. Moreover, as we pointed out yesterday, year over year comparisons dipped in April compared to March for the CPI, meaning what inflation there is actually cooled month over month.

Put it all together and it seems the stock market has once again jumped the gun on interpreting what the Fed said yesterday. We’ve seen it before, and odds are we will see it again. While we suspect calmer heads will prevail, in the short term it makes for a very choppy market.

The market’s reaction to the Fed’s comment led our shares of PowerShares DB US Dollar Bullish ETF (UUP) to rebound sharply yesterday. Given our view discussed above, we suspect this pop will fade. As such, we are inclined to use the quick move to our advantage and therefore we are issuing a SELL rating on UUP shares.

Pairing the markets latest misinterpretation of Fed-speak with the growing bout of bad news from retailers over the last several days, has led the market lower stopping out the PetMeds Express (PETS) June $20 (PETS160617C00020000) and Chipotle Mexican Grill (CMG) June $475 calls (CMG160617C00475000). While it’s never what we want — to be stopped out — the stop loss levels we utilized prevented additional losses.

The silver lining in all of this is the inverse ETF positions on the Tematica Select list, which we added given our own growing concerns with the market over the last several weeks, have all seen solid movers over the last several days. With increasing skepticism mounting over the economy, and other international factors like recent developments in South America and the looming Brexit vote, we will continue to keep ProShares Short Russell 2000 (RWM), ProShares Short Dow30 ETF (DOG) and ProShares Short S&P500 (SH) on the Tematica Select List.

Given the near-term outlook that looks more and more like a teeter-totter, meaning up and down day to day, we will hold off adding new option positions to the Tematica Select List as we run the risk of simply being stopped out. Our thinking is to let the market waves subside and dip our paddles back into calmer waters.

Recap of Action Items from this Week

• We are issuing a SELL rating and closing out the PowerShares DB US Dollar Bullish ETF (UUP).
• Recent market gyrations resulted in being stopped out of our Chipotle Mexican Grill (CMG) June $475 calls (CMG160617C00475000)  and the June $20 calls for PetMeds Express (PETS160617C00020000).
• We continue to keep ProShares Short Russell 2000 (RWM), ProShares Short Dow30 ETF (DOG) and ProShares Short S&P500 (SH) on the Tematica Select List.