FOMC Jitters – Use SPY $200 As Your Guide – Light Trading Until the Fed

Posted 9:30 AM ET - Yesterday the market probed for support early in the day. It gradually recovered and finished unchanged. We're in a news vacuum until the FOMC statement tomorrow afternoon. Trading will be very light. I am short a few stocks and I am long a few puts. My bias is bearish, but my exposure is very small. If the market closes below $202 today I will add to my positions near the close. If the market trades below $200, I will take a more bearish stance. That is unlikely to happen before the FOMC. As I mentioned yesterday, we will see some nervous jitters ahead of the FOMC. The "hot" jobs report might impact the rhetoric. The Fed will not hike rates before the election so this statement really won't matter much. Retail sales fell .2% and that was in line with expectations. Global economic conditions are deteriorating and the US has the best house in a bad neighborhood. The rally we've seen in the last few weeks was sparked by central bank money printing (BOJ, PBOC and ECB). Credit concerns eased a bit and emerging markets liked the moves. Commodity stocks and cyclicals lead the rally and there was a ton of short covering. I believe this sugar high will end soon and these stocks will roll over. I am not going to prematurely short this market. I will use SPY $202 (200-day moving average) as my guide. I will buy a few puts if we can stay below it today and I will keep a slightly bearish bias overnight. If the market falls below SPY $200 (100-day moving average and horizontal support) I will get much more aggressive with my shorts. From a day trading standpoint, down opens have been fantastic for us this year. Once support is established, we buy stocks with relative strength that fit our pattern. Here is a video I recorded yesterday morning that includes the stocks we look for. 5 MINUTE TRADING VIDEO FROM THIS MONDAY Try to make your money early today. After the initial move, we are likely to stall. The FOMC statement is the only event that will drive the market this week and once it is released, the news will dry up. Use the major moving averages as your guide for swing trading and use the first hour range as your guide for day trading. . .

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