Do you have an edge?

Will we get the typical pre-FOMC choppy price action or will the 380 earnings reports break the mold?  Perhaps the bigger question is, Do you have an edge?  On the positive side, the market is trending higher, and so far earnings have been overall strong.  On the other side, the market appears overextended, and the uncertainty of earnings reports and FOMC looms.

During times like this, I normally slow my trading activity.  I try to focus on my current portfolio first.  I tend to slow to add trades during times of uncertainty.  I’m only interested in low-risk entries to keep potential losses as small as possible.  I try not to chase the morning pops and drops.  I choose instead to wait 15 to 30 minutes before looking for new risk.  Always remember quality is more important than quantity and prepare for anything.

On the Calendar

On the Economic Calendar, this last day of October begins the FOMC 2-day meeting kicks off.  Their announcement regarding interest rates will occur tomorrow at 2:00 PM Eastern.   At 8:30 AM today we have the Employment Cost Index is expected to surge 0.7% today.  The 9:00 AM reading of the S&P CoreLogic Case-Shiller which is expected to rise 0.6% bringing the year-on-year rate up to 6.0%.  Then at 9:45 AM the Chicago PMI is expected to slow just slightly to 62.0 according to forecasters, which is still very strong.  The 10:00 AM Consumer Confidence is seen rising to 121.0 vs. September’s 119.8 print.

The Earnings Calendar ramps up today with more than 260 reports.  We had better get used to it because the number grows to more than 380 on Wed. and over 600 on Thursday.  Prepare, prepare, prepare.

Action Plan

Political turmoil, earnings, and FOMC.  Oh, My!  With so much on the proverbal market plate, the next few days the uncertainty alone is likely to give traders indigestion.  There are a lot of good charts, but because of all the news and the potential violent reactions can you still find an Edge?  Tough call.

The good news is that the market is still wildly bullish even considering yesterdays little pullback.  If earnings continue to come out positive, then there is every reason to believe that the market will continue its trend.  Futures are pointing to a bullish open, however, keep in mind that normally we get choppy price action as the market waits on the FOMC.  The problem is, I’m not sure normal applies here!  Anything is possible so plan accordingly.

Trade Wisely,

Doug