Fomc

Since im new to the business, what would you advise when theese kind of events happen? Buy into rally (if it happens tomorrow), fade it, steer clear of the market? Actually what happens with theese rate cuts, I know what they are but.... I was just wondering do thy have immediate effect on the markets?

Just a thought
Alex

 

One of the traders/writers at Tradingmarkets.com says to trade the 3rd wave after the announcement. I don't know how it works honestly. I have traded the FOMC once on CSCO and they beat me up pretty bad on it. Now I sit on my hands while the FOMC meets. Good luck.

~EC

 

yeah I just hit the driving range or go mountain biking for the day...might be a good winter so you'll find me on the slopes of MT Snow, VT for any winter time fed meetings.

Pray for Snow!

 

Opening: will go up
Afternoon: flat
Before closing: sold off

 

I've found that the price action right after the announcement is so fast and whippy that it's a crap shoot to trade then. But lately the market seems to react less violently after the news. Fading the first move for a quick scalp has worked in the past. I'll be sitting on my hands.

 

I have traded every single FOMC meeting this year (and I think I broke even on those days) and here is what I noticed:

With the exception of the surprise rate cuts, just about every rate cut turned into a rally off the open, sell-into-the-close scenario. However, the very last rate cut we had, it simply wasn't the case, the market sold-off before the meeting and rallied into the close.

Does this signify the turn of the overall bull/bear tide? I don't know, what I do know, is that I am more willing to bet on the opposite of the morning direction. That said, the first immediate move after the announcement is the true move (and if it is the opposite of morning direction, even better chance), but it is also the move you don't want to get into, as a violent shakeout to the other direction will usually hit, hard, and jumping into the first move will bring a swift painful death.

The key is the third move, which should be the direction of the first move (1-2-1 fashion), and that's the move to jump into. The problem is no one knows how big each swing is, I re-read my own trading journals over the past months and I have noticed that even when I knew what the market will eventually do, it was very hard to make money.

I will concentrate on banks and brokers tommorrow, lots of volatility in BKX/XBD on rate cut days, but when the news come out I will be a lot more willing to do tier 2/3's than tier 1's, but I will be very light until I see confirmation for the third move.

Another note, last Fed. meeting, a game which I was almost blown out, I noticed that in many major sector shake-out's, a low tier will often point toward the true direction. For example, when I trade OSX, SLB is the leader, but he shakes a lot, and sometimes I get more confirmation watching something like NOI or VTS, very small caps, but the specialist in those don't have to do major shakeouts, and often uses true supply and demand information to paint their charts. Those stocks are not worth trading, but they are worth watching. Last Fed. meeting I had AGE which trended the way it is supposed to trend all along, while all the big name brokers (GS, MER, MWD) did a lot of shakeout's, the key to victory may be a small cap or two.

Last but not least, I learned the hard way that a big move can happen as late as 3:20, last Fed. meeting I was long 3000 share's worth of various big-caps and I tapped out at 3:15 . . . Be light, as you will take some pain even if you are right, but it will be worth it if you can hold through the pain. (Of course, if you are wrong . . . )

P.S. Neo: Get out of the game before 2PM and watch.

 

Find a good stock from around $10-15 that's been beaten down lately. Then put a limit-buy on it for 5% less just after tomorrow's bell and play a round of golf...

just a another thought
gus

 

I didn't play today but looks like this worked again. Big deal.

~EC

 

Man , was Hitman right.... If only I jumped on the third move... OK, I watched today, quite an interesting day I must say. Dang , am frustrated, the best trending day and I did nothing.

What I would like to know from your experience what are we likely to be looking at, selloff (some profit taking) or a continuation? This cut just may do the trick in recovering the economy...and if its true that the earlierones are to take effect in the future... are we looking at a new bull market ahead??

Hop ya'll had a great day
Alex