Market Thoughts: Fed Set to Make Big Announcement
Higher, lower, or no change? That is the question everyone is asking when Chairman Ben Bernake announces the rate decision at 2:15PM EST. Consensus is indicating either a 1/4 point cut or a pause in the rate cut series. The pause would be due to inflation concerns drifting up from analysts and pundits research.
What is perhaps more important than what the fed actually does, is what they will hint at happening in the future. Listen carefully to the announcement, there may be some actionable nuggets of information for traders to position themselves for the near term.
Positive numbers from the jobs report and the GDP, released this morning, appear to indicate that the US economy is not in a recession. Along with the recession thoughts, it’s interesting to note that Bernake’s Princeton research focused on the Great Depression in the US.
DJIA E-minis YM
The channel system triggered shorts this morning in the YM when the lower line was cleanly violated on the downside. About 27 points were available to capture prior to a nice meandering trip back to the lower channel line. Exits are discretionary at any point prior to break even, and this move gave traders plenty of time to capture profits prior to break even.
The GDP and jobs numbers were released causing the YM to rocket up around 70 points into the channel, however the upper line of 12923 is holding firm, keeping the system flat. This could be a wild day today in the DJIA, hopefully the channel system will keep us on the right side of the market.
YM- FLAT
Gold
Gold continued its sell-off all the way down to 862.83 this morning. It is rebounding a little here as a reaction to the selling. I am anticipating a quick trip to the 850 level where the next support lays.
SHORT
Oil
Finally, a doji formed on the daily chart at what appears to be the top around 120. Oil has retreated to about 116 and seems to be hesitating here. This market is also awaiting the Fed’s decision because of the effect it will have on the dollar. In addition, remember that May is historically the weakest month of the year for oil. I’m awaiting the short signal to enter. FLAT
Good Luck!
Dave Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.