Mixed Signals

The four major indexes left behind mixed signals yesterday even as new record highs printed.  Unsettled price action ahead of the FOMC is not a surprise but couple that with market highs and the uncertainty meter maxes out.  Toss in a political upset that could threaten the tax reform plan, and policy going forward we could see some turbulent price action.  During major news events, we lose our edge.  Candle signals, price patterns, support, resistance, and trend are no match if the market becomes emotional.  Please understand I’m not suggesting that it will become emotional only that the possibility exists.  When we trade without an edge, it’s no different than standing at a roulette wheel betting on red or black.  My focus today is on preserving profits and protecting capital rather than adding risk.

On the Calendar

The hump day Economic Calendar begins at 8:30 AM with the Consumer Price Index.  Forecasters see the overall CPI rising 0.4%, with 0.2% taking out food and energy.  Year-on-year, the CPI is seen rising 2.2% with the core at 1.8%.  At 10:30 AM is the important EIA Petroleum Status Report that last reading showed a build in supplies and raised questions on demand.  Of course what the market is really waiting for is the FOMC Announcement & forecasts at 2:00 PM.  Everyone is expecting a rate increase however the forecast could be the wild card if additional rates increase are expected next year.  At 2:30 will be Chairman Yellen’s final FOMC press conference.

On the Earnings Calendar we have about 30 companies reporting results, but once again I don’t see any market-moving reports.  Please keep checking reporting dates!

Action Plan

Yesterday the market left behind a mix of signals, but uptrends are still intact.  The DIA and the SPY both made record highs yesterday but found some sellers in the afternoon session.  The SPY printed a possible topping shooting star pattern by the close day raising a little uncertainty.  The QQQ’s chose to rest with a spinning top doji, and the IWM headed south with a bearish engulfing however still above support.   A little uncertainty ahead of the FOMC announcement & forecasts is not that unusual, but the fact it’s happening at a market high should raise a few caution flags for today.

I’m expecting a choppy day up until the FOMC at 2:00 PM then anything is possible.  Expect very fast intraday price action after the announcement with the possibility of whipsaw reversals that could continue through the press conference.  I won’t rule out new trades today but will say it would be very unlikely due to the loss of edge around a new event such as the FOMC.  Although the Futures have pointed to bullish to flat open, I would not be at all surprised to see some selling this morning to capture profits ahead of the unknown.  If the Bears do come out to play, I will not hesitate to bank some profits.

Trade Wisely,

Doug