With under a week to go until we learn if the Fed will boost interest rates at its next Federal Open Market Committee meeting beginning on March 15th, the stock market is now back in “wait and see” mode after having climbed rather steadily over the last four months. Over the last few weeks, the odds of a rate hike at the March meeting have climbed higher even though there have been a few data points that prompted the Atlanta Fed to slash its GDPNow forecast to 1.3 percent this week from 1.8 percent just a week ago.

Yesterday’s ADP Employment Report was stronger than expected, but given the data contained in the Markit Economics February Manufacturing and Services PMI reports as well as those from ISM, an upside print was expected. The upside private sector job growth didn’t move the market higher as it was another conflicting data point with the recent core capital goods, personal spending and February auto data that led the Atlanta Fed to cut its outlook. What this means is Friday’s February Employment Report will be closely watched to not only as an indicator of job creation, but also because it’s the last major data point ahead of next week’s Fed meeting. Yes, we’ll get the February inflation indicators next week, but we’ve gotten several looks at inflation data over the last few week from a global perspective and it does appear to be heating up. We’ll also get the February Retail Sales report next week, but given the lackluster prints that report has delivered over the last few months, expectations are rather low.

We suspect the Fed is likely to not pull the trigger next week given conflicting data and the fact that Yellen and crew have yet to ascertain the impact of President Trump’s tax reform plan, largely because those details have yet to be shared.

What this means for us is even though we’re looking at new potential call option trades in companies like Applied Materials (AMAT) and revisiting ones like Universal Display (OLED) as well as US Concrete (USCR), we’re going to hold off until we get the Fed’s decision and the market’s reception to it. We’ve been talking about our taking a more cautious approach as the market melted up through the end of February — we detailed several reasons in this week’s Monday Morning Kickoff and added a few more in yesterday’s Tematica Investing. We have our inverse ETF positions in place, and those should offer some protections. Subscribers that are lacking any positions in inverse ETFs like ProShares Short Russell 2000 (RWM) or ProShares Short S&P 500 (SH) should consider adding shares in either or another inverse ETF. Much like car or home insurance, it pays to have it in case we need it. We may not, but it’s a small price to pay to hedge your call options.

Should the Fed not raise interest rates next week, odds are we could see some pressure on our PowerShares DB US Dollar Bullish ETF (UUP) June 2017 $27 calls (UUP170616C00027000) calls. Remember that when we added the calls, we viewed a May rate hike was far more likely, and we still do based on the data we’re getting. If that weakness emerges next week, we could use it to our advantage.

• We continue to rate the PowerShares DB US Dollar Bullish ETF (UUP) June 2017 $27 calls (UUP170616C00027000) a Buy at current levels.
• As a reminder, we would buy these UUP calls up to $0.32. 
• Our stop loss remains at $0.10 for now. 

Potential Short Trades We’re Evaluating

Shares of United Parcel Service (UPS) traded off 1 percent last week, and as we know rather well the corresponding move in options tends to be far more amplified. We were not disappointed in that relationship as our UPS April 2017 $110 calls (UPS170421C00110000) calls took it on the chin over the last week. Next week’s Retail Sales report is the next catalyst to watch for the shares, and we once again expect share gains in Non-store retailers (code for digital commerce) at the expense of brick & mortar retailers in February. We’ll have more on that and our next steps with the UPS calls next week. We’ll continue to hold off with a stop loss recommendation for now, and we’d prefer to scale into the position at better prices ahead of the Easter holiday that falls on April 16

That same February Retail Sales report is likely to show continued pain for department stores and other mall focused retailers. Those continued problems, like the ones at Macy’s (M), Sears (SHLD) and others, are becoming the woes of Simon Property Group (SPG). We added a short position on SPG shares last week with a $150 target price and a $200 buy stop order. We see no reason to reverse our view from last week. To be blunt, we see SPG shares in the cross hairs of our Connected Society investing theme and there is no near-term fix for that headwind on Simon Property’s business.

• We have a Sell recommendation on shares of Simon Properties Group (SPG) and a short position on the Tematica Select List. We see the company’s business as vulnerable as its tenants struggle with the headwinds associated with our Connected Society investing theme.
• Our price target on SPG shares is $150 compared to last night’s closing price of $182.52. 
• We are instilling a protective buy stop order to limit potential capital losses in this position at $200.

Rail Car Loads Continue in the Right Direction

As we finished the first week of March, weekly rail traffic rose 1.8 percent compared to the same week a year ago with strength in carloads, up 6.3 percent year over year, offset by declines in intermodal loadings. Week to week data can be conflicting, which is why we tend to favor the bigger picture. In doing so, we find that year to date, U.S. railroads reported cumulative carloads, up 5 percent from the same point last year with a 0.2 percent decline in intermodal compared to a year ago.

At Rail Equipment Finance 2017 (yes, there is a conference for that), it was reported that both Trinity Industries (TRN) and American Railcar (ARII) were seeing a continued pickup in order inquiries, something that began in 4Q 2016 and has persisted thus far into the current quarter. We view that as a positive indicator that the market could be too pessimistic on railcar manufacturers in the near-term. As such, we’ll continue to keep our Buy rating on the Trinity Industries (TRN) April 2017 $30 calls (TRN170421C00030000).

• We continue to rate the Trinity Industries (TRN) April 2017 $30 calls (TRN170421C00030000) a Buy at current levels.
• Given the pullback in the TRN April calls, we would now be buyers up to $0.75
• We have no stop loss recommendation at the shares at this time.