FOMC Statement Likely To Be More Hawkish – Watch For Negative Reaction

July 27, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:40 AM ET - Yesterday the market probed for support and the selling was brief. Buyers stepped in and stocks closed in positive territory. Apple posted better than feared results and the stock is rebounding this morning. That will put a bid under the tech sector. Amazon and Google will release tomorrow after the close. The FOMC statement today could include hawkish rhetoric. Labor conditions have improved and the Fed knows that Brexit is not raising credit concerns. I believe the reaction to the statement will be bearish, but the selling will only last a day or two. Earnings season is in full bloom and the market will focus on profits. The strongest companies post results early in the earnings cycle and the news will be good for another week. The market should make one more push higher after the FOMC dip, but resistance will start to build. The back half of earnings season will be lackluster and good news will be priced in. Credit concerns will start to weigh on the market and fear of a September rate hike will spook investors. August is typically a bearish month and I expect to see profit-taking in the next few weeks. If you have been carrying overnight longs, I suggest you progressively take profits. You have nice gains and the upside is fairly limited. I will continue to day trade from the long side. I have been able to find two or three really big runners each day and I'm making excellent money. We should see some decent action early this morning and then the volume will dry up. Try to make your money early and be flat into the FOMC statement. I will have a few shorts lined up in the event that the reaction is negative. Market support is at SPY $215.75 and if that level is breached the selling will accelerate into the close. We should see decent volume the rest of the week. . . image

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