The FOMC

The North Korean agreement in the rear-view mirror the market can focus on the FOMC.  The odds of a rate increase are very high, but the big question is will the FOMC stop its balance sheet reductions early?  At 2:00 PM Eastern tomorrow we will know the answer, until then its only speculation.  If the FOMC does surprise the market with a change in policy, there will likely be a significant reaction in price.  It may be wise to consider your risk and how much you are willing to hold ahead of the announcement.

Tensions between the US and Canada on trade negotiations seem to be growing with our leaders seem unwilling to play nice with each other.  Needless to say, any news that improves or worsens the trade negotiation process could quickly move prices.  The market hates uncertainty so stay focused on price action for clues and remain flexible.

On the Calendar

Topping the Tuesday Economic Calendar is the start fo the June FOMC meeting which will culminate with their Announcement and Forecast at 2:00 PM Eastern tomorrow.  At 8:30 AM Eastern we get the latest reading on the Consumer Price Index where forecasters expect the core rate up 0.2 percent and the Year-on-year up three tenths to 2.8 percent.  The Redbook is at 8:55 AM then two bond auctions at 11:30 AM and 1 PM.  The Treasury Budget comes out at 2:00 PM and is expected to show a deficit of 144.0 billion according to forecasters.

A light day on the Earnings Calendar with just 25 companies reporting earnings.  Notable earnings before the bell is LE with HRB reporting after the market close.

Action Plan

With a historic agreement signed to denuclearize North Korea the market has now turned its attention to the war of words between the US and Canada and the FOMC meeting that kicks off this morning.  Futures are currently pointing to a slightly lower open but should not be too big of a surprise considering the Dow has gained nearly 1000 points in just over a week.  Keep in mind; it was just nine trading days ago the Dow was treating to fail of the 50-moving average.  Both the Dow and SPY left behind possible topping candle patterns at price resistance points suggesting a little caution might be in order.

As we wait for the FOMC decision, it’s not uncommon for the market to become a bit anemic on volume with choppy price action.  However, considering the sharp rally and the jitters over trade negotiations some profit-taking would not be out of the question.  I will be watching price action closely today and will likely take some profits to reduce risk before the FOMC announcement.

Trade Wisely,

Doug