Fear

The data breach in FB coupled with the unknown of the coming FOMC decision gave the bears just what they needed to strike fear into the hearts of traders and investors.  Fear is only of those powerful emotions that can quickly create a lot of technical damage and make our jobs as trades that much more difficult.  When we allow fear to creep into our trading, it diminishes our ability to make good trading decisions.  Remember trading is a business, and just like any other business emotional decision making has no place in business.  Emotional trading is like cancer relentlessly eating away your capital.  The good news is this cancer is curable with a simple trading plan with a set of rules designed to protect you from YOU!  If you don’t have a plan, stop trading until you do or continue to watch your capital disappear.  You are the CEO of your business and solely responsible for your results.  The choice is yours.

On the Calendar

The very light Tuesday Economic Calendar biggest highlight is the beginning of the 2-day FOMC meeting.  Other than that we have the Redbook at 8:55 AM and a bond auction at 11:30.  None of which would be expected to move the market.

The Earnings Calendar shows 52 companies are expected to report today.  FDX is the most noteworthy report of the day that releases results after the bell.

Action Plan

Yesterday saw some ugly price action as traders and investors choose to dump positions.  Some point to the selling on FB as the catalyst for the bearish day, but I think jitters ahead of the FOMC interest rate policy announcement is more likely to blame.  Whatever the cause, yesterday delivered serious technical damage to the SPY and DIA charts and spiking the VIX over 20% as fear seemed to overwhelm the market.  The QQQ managed to hold onto its 50-day average but sadly broke some important price supports as well as the current uptrend.  Small caps seemed to fair the best not only bouncing strongly off the IWM 50-day average but also recovering important price support by the close of the day.

As I write this, Futures markets a mixed with a slight bearish bias.  With no major earnings or economic reports this morning the market will have little more than its nervous emotions to chew on today.  If the Bears step in with some, follow-through selling fear could quickly turn into panic.  On the other hand, if the Bulls step up to defend critical price supports, then we have a chance of repairing some of the technical damage created by yesterday’s selling.  With the FOMC announcement on Wednesday afternoon, choppy price action is likely.  Couple that with rising volatility and we have the potential of wide range chop with fast whipsaw price action.  Plan carefully and protect your capital.

Trade Wisely,

Doug