What if?

Waiting is never fun.  It allows the mind to wander through all the “What If” scenarios and invites speculation of the unknown.  The financial media will do it’s it part to whip up the emotion with dramatic headline graphics and bumper music that would make Hollywood jealous.  What does all that drama and speculation accomplish?  Nothing but make us emotional.

The “what if” game is endless and unproductive.  We still have to wait for the FOMC decision, and no one knows what that will be until its released.  Will they add additional interest rate increases to the forecast?  We will find out at 2:00 PM Eastern and no amount of talking head conversations will change that.

What we can do as retail traders is prepare.  If you’re very nervous about the announcement, then perhaps your over-trading and need to make some adjustments to your risk.  If you’re new to trading or lack sufficient experience for such events perhaps standing aside is your the best course of action.  Work to make good business decisions without bias or prediction and be prepared to react without emotion.

On the Calendar

A big day on the Economic Calendar on this hump day.  We get started with important reports at 10:00 AM Eastern when Existing Home Sales which consensus expects a slight increase to 5.420 million annualized rate.   At 10:30 AM the Petroleum Status Report which as recently shown a decline in supplies helping to bolster oil stocks ever so slightly.  After that it’s all about the FOMC Announcement at 2:00 PM along with the FOMC Forecasts.  Then at 2:30 PM the newly seated Chairman Powell will have the entire world focused on every word he utters during the Press Conference.

On the Earnings Calendar, there are 56 companies expected to fess up on their quarterly results.

Action Plan

Today the entire financial world will be focused on the FOMC and what our new Fed Chairman will have to say at the press conference.  Based on his introduction speech where Chairman Powell seemed to lean hawkish has the market speculating more interest rate increases in the FOMC forecast.  Interest-sensitive securities have experienced some selling this week in anticipation of this report.  It’s understandable that the market is pensive as we wait for their decision but all the speculation is, and drama is a waste of time.  As retail traders, all we can do is wait for the decision and react once the decision is known.

I’m expecting choppy price action ahead of the 2:00 PM announcement.  However, after the release of the statement and forecast, we can expect very wild price action as the market reacts.  Today is likely too much more volatile than we have recently experienced.  Currently, the futures are pointing to a mixed open.  The spooky thing is that the DIA and the SPY are sitting right on the edge of a very steep cliff.  Any miss step or poorly chosen word could easily push them over the edge.  Let’s hope that’s not the case and instead that Chairman Powell offers a steady hand that prevents a fall.

Trade Wisely,

Doug

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

All eyes on the FOMC.

With very little on the Economic Calendar and earnings season finally starting to wind down all eyes will be focused on the FOMC.  In fact, all the attention over the next 3-days will likely focus on just one man.  Jerome Powell, our new Fed Chairman.  The market has obviously expressed considerable anxiety about the prospect of additional interest rate increases.  The big unknown is will the new chairman’s feathers be dovish or hawkish?  The market hates uncertainty and consequently may react emotionally both before and just after the FOMC policy statement.  We could expect some additional wild price action during his first Press Conference as well.  Remember the market and stay irrational much longer than you and I can remain liquid.  Anything is possible so remain flexible and plan carefully for what could turn out to be very bumpy ride.

On the Calendar

To kick off this FOMC week we begin with a Fed Speaker at 9:00 AM from the Atlanta Federal Reserve Bank.  After that, all we have is three bond events to wrap of the day.

On the Earnings Calendar, we have quieted down as well with just 55 companies reporting results today.  However, just because earnings season is winding down, it doesn’t relieve from the responsibility of checking earnings dates against current holdings and stocks we are planning to purchase.

Action Plan

Friday turned out to be a choppy day of price action.  The Dow tried a couple of times to get over the big round number at 25,000 but ultimately failed to hold above it by the close of the day.  The QQQ and the SPY seemed content to chop in a small range but while the IWM bounced slightly to close the day positive.  Sadly, the SPY closed below the 50-day average raising concerns that the Bears could gain the upper hand.

As I write the morning note, the Dow Futures are decidedly bearish and currently pointing to a 130-point gap down at the open.  If the selling pressure persists, we could easily start breakings some key support levels which would encourage even more bears to plie on raising the fears about the overall market.  If there ever was a time that we need the Bull to step up it’s now.  Keep in mind that the FOMC begins its 2-day interest rate policy meeting on Tuesday with their decision released Wednesday afternoon.  The market continues to be hypersensitive about rates, and with a new Fed Chairman at the helm, tensions are high.  I’m expecting some wider ranging chop that could contain some fast price action as we wait for their decision.

Trade Wisely,

Doug