Bulls maintain control.

The Bulls maintain control holding off profit takers yesterday with the IWM rising to new record highs and the QQQ’s pushing higher.  That’s all good, but there is reason for some caution with the DIA and SPY chopping sideways below price resistance levels.  The trend of all four indexes is still up so don’t read caution as bearishness.  The Bulls are still in charge at the moment however the big question of the day is will they maintain that control after the FOMC announcement and forecast is released?

Currently, futures are pointing to a bullish open but don’t be surprised to see choppy price action after the morning rush as we wait on the Fed decision.  After the release and during the Chairman’s press conference anything is possible.  Expect wild swings and very fast price action as the reacts.  Plan your risk accordingly.

On the Calendar

A busy day on the Wednesday Economic Calendar gets going with potential market-moving reports at 8:30 AM Eastern.  According to consensus producer prices will increase by 0.3 percent for the Headline with 0.2 percent when excluding food, energy and trade services.  At 10:30 AM is the EIA Petroleum Status report which is not forecast forward.  Then at 2:00 PM comes the big event of the day with the FOMC Announcement and Forecasts.  Most expect an interest rate increase of 25 basis points, but the real fireworks will be in the forecast.  The excitement will continue with the Fed Speaker press conference at 2:30 PM to close the calendar day.

On the Earning Calendar, we have 26 companies reporting results today, none of which look particularly market-moving.

Action Plan

A bit of a mix in the indexes yesterday as the DIA and SPY did a sideways shuffle while the QQQ and IWM managed modest increases.  All and all a good day considering the uncertainty swirling around the market.  With the FOMC today we could see choppy sideways action continue after the morning rush until 2:00 PM Eastern where we’re likely to see wild price swings in reaction to the statement and forecast.  I think the expected 25 point basis increase is already baked into the market so it will be the forecast that lights off the fireworks.  Will, the Fed come of more hawkish by planning additional rate hikes into the future or will they shift to a more dovish stance?

There is a good chance that I will reduce risk ahead of the announcement by taking some profits on existing positions.  I will also avoid considering new risk until after the announcement and the market reaction has picked a direction.  In on the words, I want to keep my powder dry until the storm has passed.

Trade Wisely,

Doug