Don’t Get Sucked In
It is finally
here, the FOMC meeting, a chance for volatility to get pumped into
the markets, before we head into the traditionally slow Labor Day period.
Typically, trading the morning of the Fed meeting offers some good trades within
the first hour.
Like most things in life, trading on
Fed announcements has changed over the years. Previously you could trade the
first move off the announcement and then play each additional move. Now,
assuming that there is no unexpected move, the first move is typically a sucker
play, the moves thereafter are where traders find great price action with follow
through and volume.
Here are my thoughts going into the
meeting announcement at 2:15 p.m. ET:
1. If the Fed cuts a 1/4 point
as widely expected, I will do nothing on the first move. Rather, I will wait for
a pullback or a rally on the one-minute S&P futures chart before initiating
a trade.
2. A half-point cut would be
viewed as very positive, and unexpected. As a result, I anticipate playing the
move to the long side. However, this scenario could be viewed by some that
perhaps the economy is far worse than expected.
3. No action. This is the only
option that is quite clear. This would be viewed quite negatively by the market.
I would play this move to the short side.
More than likely, we will be dealing
with the first scenario. So be patient, let the market come to you and don’t get
sucked into that first move. More importantly, don’t get sucked into the
“noise” in the S&Ps and Nasdaq futures right before the
announcement. I have seen a few traders over the years lured in, only to be
scrambling to exit the position when the “real” announcement comes
out.
Key Technical
Numbers:
| S&Ps |
Nasdaq |
| 1192 | 1573 |
| 1185 |
1566 |
| 1184 | 1554.43 |
| 1180.83 | 1533 |
| 1172 (very key, a confluence number) |
1520 |
| 1167-68 | 1500 |
| 1162 | 1493 |
| 1158 |
Keep in mind, these technical numbers
hold less weight when there is a release of significant “fundamental”
information, like today’s Fed rate policy. Just something to keep in mind.
As always, feel free to send me your
questions and comments.