QE or not to QE….that is the question traders hope to see answered by the FOMC today. We have a clearer picture of the European outlook with the Federal Constitutional Court of Germany approving the EU’s latest European Stability Mechanism yesterday. Back in the U.S. prognosticators are predicting anywhere from a 60%- 90% chance of Quantitative Easing coming from the Fed this afternoon.
STOCKS LIKE IT
While there is plenty of debate on the effects of “QE3,” the equity markets tend to like it. The tough call for traders is guessing how much of another QE has already been priced in. This guessing game makes today’s trading a bit tougher than most FOMC days. Fed days are tough to trade as it is, usually with tighter ranges, and lower volume leading up to the announcement. We often find ourselves in “Hurry Up and Wait” mode.
GO FLAT INTO FOMC
I’m always cautious on Fed report days, even more so today. I like buying the December S&P e-mini futures on dips below 1430, closer to 1425 if possible. I’d be glad to be closing out in the 1432-1435 level. I strongly recommend being flat ahead of the FOMC release. Be careful getting back in the market after the announcement, we could have some wild swings.
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.
