What To Do Ahead Of The Fed
The December S&P 500
futures (SPZ and ESZ) opened Monday’s session with a +1.75 point gap
to the upside after getting a lift on news of three mergers with a value of $66
billion. The momentum lasted through the first 30 minutes, before the value of
the biggest deal, between
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PowerRating) and
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PowerRating), was questioned as being too
pricey and gave the longs a good reason to book some profits.
Friday’s close held as support as the contract
bounced around that level through the lunchtime lull, before breaking down into
the red and to the session low. Buyers came in after the bonds closed, but ran
out of steam again to send the futures sharply back down into negative
territory. Position-squaring the last half hour left the contract mostly
unchanged.
The December S&P 500 futures closed Friday’s
session with a gain of +0.75 point, and closed in the lower 1/2 of its daily
range. Volume in the ES was estimated at 541,000 contracts, which was behind
Friday’s pace and below the daily average. On a daily basis, the contract posted
a doji right at its 20-day MA resistance. On an intraday basis, the 60-min chart
reversed off of 50% Fib resistance and settled with a bull flag at 15-period MA
and 200-period MA support, while the 13-min chart has formed a cup with a long
handle (see chart).
On Tuesday morning, we have the Sept. Durable
Orders number at 8:30 am ET, with its consensus of a 1% increase. That is
followed at 10:00 am by the Oct. Consumer Confidence report, and its consensus
for a slight increase to 79.3. At 2:15 ET, all eyes will be focused on the FOMC
announcement. Rates are expected to be left alone again, however, the
interpretation of the Fed’s policy bias could cause some market whippiness. As
always, be as flat as you can ahead of the announcement.
Are You Adapting To Current Market Conditions?
When the equities markets switched to decimals a
few years ago, many intraday traders were affected by it. Traders had to
“adapt” their trading methods to conform to the tighter spreads and decreased
volatility. Those that didn’t adapt either blew up or left to do something
else.
I did a comparison of this past eight weeks’
ranges in the S&P 500 and the Dow to the same time period a year ago. The
average weekly range for the S&P 500 in the past eight weeks is 29 points,
compared to 51 points for this time last year. The Dow is roughly in the same
boat. The average weekly range for the Dow in the past 8 weeks is 270 points,
compared to 495 points for this time last year.
You could make another comparison with this past
summer’s ranges also. What does today have to do with last year or this past
summer you ask? The answer is absolutely NOTHING. The point is that you
have to make adaptations to your trading to conform to the changing market
conditions, whether it be on your stops, your profit paring, or your
expectations and reactions in general.
I use the word “conform” in a humble sense
because none of us are not big enough to make the market comply with our
methods. If the range on what you’re trading is too tight for you, or your
expectations aren’t realistic for what the market is giving you, then you need
to adapt your trading plan parameters or find something else that suits you with
a better tradable range.
Please feel free to email me with any questions
you might have, and have a great trading day on Tuesday!
Chris Curran
chrisc@tradingmarkets.com