The Federal Reserve announced it will continue with its stimulus plan yesterday. Starting in January, the Fed will spend $45 billion a month on Treasury securities. Interest rates will be tied to unemployment and inflation. Rates will remain low as long as the unemployment rate is above 6.5 percent, and projected inflation is no more than 2.5 percent.
The expanded asset-purchase program appears to be an attempt by the Fed to reduce unemployment rates and to stir growth. This new batch of buying will start just as “Operation Twist” comes to an end. Now that we have seen what the Fed’s plan is, we can return to our favorite program “What’s the Deal with Fiscal Cliff?” The debate continues, and the only thing that is certain is that neither side is close to the other.
Yesterday the market closed lower for the first time in five sessions. I think today will be a bit “choppy,” meaning plenty of back and forth (or up and down trading). These types of days can be especially hard on traders looking for entry points in the market. I want to see the market have a bit of a breakout before taking a position.
If the opportunity presents itself I would take on long positions in the 1417-1418 level in ESH3. I’d be looking to cover near the 1420-1421 area. If the market breaks above 1422, I would look to be a buyer near 1423. Look for short term resistance to come in near 1426. If the market can push through there, the bulls may be on for a run to yesterday’s high of 1432.
Traders should be careful not to get “chopped up”. Try and stay away from sideways moves and look for to play breakouts. Survival is the name of the game.
*March is now the front Month contract for the Equity Index products.
THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
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