Market Will Bounce or Drop – FOMC Minutes Today – Go With the Reaction

October 12, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:10 AM ET - Yesterday we finally got some movement. Once the selling momentum set in buyers pulled bids and the SPY closed below the 100-day moving average. Today we will either see follow-through selling or we will bounce. The reaction to the FOMC minutes this afternoon will determine which way we go. Fed officials were divided during the last meeting and they did not have the soft jobs report data. Some officials wanted to hike and some officials wanted to wait. The compromise was to hike this year and then to hold off until the back half of 2017. I believe that the minutes will be dovish, but I'm ready to play this either way. Earnings season kicked off and the first few weeks are typically bullish. No one wants to short stocks ahead of mega-cap tech stock earnings. If the market bounces today and we close above the 100-day moving average, we will chop around in the range while we wait for the next news event. This will be a pretty good opportunity to sell out of the money bullish put spreads. If the market drops on the news we are likely to challenge the 200-day moving average. We will be able to short that move, but we need to be cautious. The better trade will come once a capitulation low has formed. I will be ready to get long and I will be fairly aggressive. The market could go either way and if the reaction has decent pace, I will trade in that direction. I plan to hold a few overnights since I am expecting follow-through on Thursday. Trading should be very quiet this morning. Use that time to line up your long and short candidates. Once the FOMC minutes are released you will need to act quickly. Let's hope for a big move. . . image

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