Here we go, all eyes on the Fed, cut or no cut that is the question!?

Good morning, well here we are – Fed day! Little else will matter today I expect as it will be all eyes on the US and traders on tenterhooks, poised to launch a buying spree if the Fed cuts its unemployment target below 6.5%. $10bn of QE cuts are priced in now. The issue is whether the Fed lowers its unemployment target or “threshold”. This would mean loose money for longer, shaping the trajectory of interests rates far into the future. “The real drama is if the Fed does more than taper,” said HSBC’s Daragh Maher. The Fed has a two-phase trigger. It aims to wind down bond purchases to zero as the headline jobless rate nears 7pc, and then start to raise rates at 6.5pc. The problem is that unemployment has been dropping faster than expected. It is already 7.3pc and could hit 7pc soon. This would be fine if the economy was roaring back and creating jobs, but it is shedding jobs at a disturbing pace.

Yesterday’s long worked out for a few points from the 6591 area, reaching 6610 before more downside into the close and the other support level at 6572 pretty much holding. Overnight, as you would expect has been pretty flat with prices now just below 6600. We are hovering at the bottom of the 10 day channel on the Bianca and Raff charts but really today is all about the Fed. Probably a good day to just stand aside really unless you fancy a punt on the news. I expect today will be pretty flat till the news at 6pm this evening (UK time).

Asia Overnight from Bloomberg

Asian stocks rose, with the regional benchmark index trading near a four-month high, before the Federal Reserve decides later today whether to slow its $85 billion of monthly asset purchases.

The MSCI Asia Pacific Index gained 0.4 percent to 138.65 as of 12:37 p.m. in Hong Kong as eight of the 10 industry groups on the gauge advanced. Futures on the Standard & Poor’s 500 Index rose 0.1 percent.

“Any sort of announcement, whether it’s zero tapering or $5 billion or $10 billion is going to have an effect on the market no matter what,” Nick Maroutsos, Sydney-based managing director and co-founder of Kapstream Capital, which oversees about $5 billion, said by telephone. “What we do know is that it’s going to be a very, very gradual withdrawal of stimulus. We are bullish on equities.”

Fed Meeting

The Federal Open Market Committee has been meeting for two days to consider whether it will taper its $85 billion a month in bond buying. Analysts are divided on the amount by which the Fed will scale back its monthly asset purchases. Among 64 economists surveyed by Bloomberg News, 33 predict it will reduce its buying of Treasuries by $5 billion or less, with 31 forecasting a cut of $10 billion or more.

“It’s so up in the air right now that no one really knows what to expect,” said Maroutsos. “To say things are largely priced into the market is a bit naive. Now that we’re getting data that’s relatively positive, with the jobs market on the right footing and the housing market doing better, this should all be stock-market positive.”

Outlook

ftse 100 prediction
ftse 100 prediction

Today’s pivot is 6587 which hasn’t really been broken overnight, however we have a rising channel still on the 30 minute chart, with support around the 6572 area. As mentioned its really all eye on the Fed and I expect the vast majority will be keeping their powder dry today till we have a definite steer on the future plans. I am pretty much expecting a slow drift up going into the news and I think the main trade will be as per the blue arrows, with the bottom of that 30 minute channel holding (and its also the bottom of the 10 day Raff and Bianca ones there too). We also have the bottom of the 20 day Bianca at 6548, which is why I am having a slightly more bullish bias today. If prices can break the 6615 level then that will be good as it opens up 6659 and possibly even 6672. However, if yesterday low around the 6560 area breaks then we will most likely drop as far as 6517. Tricky really and its going to be interesting to see what the Fed do, as whilst data hasn’t been too bad, its hardly stellar. I mentioned a few months ago that I don’t think they will taper at all just yet – if they don’t taper then we will most likely get a large rise and break through all those resistance levels, however I am usually wrong when guessing likely news outcomes!

74 Comments

  2. Honestly I don’t understand. Few weeks back Feds only mentioned that may start tapering and the markets tanked like the world will end. Now they sure about tapering and saying it will be only around 10 billions and the markets going up. My guess is that some peoples or companies manipulating the market and the press and peoples like us find an explanation afterwards….

  4. Afternoon all

    Not too surprising to see a gentle grind down as the markets wait for the Feds announcement re QE. Small short from this morning closed before Wall St open. just about getting used to my new platform.

    Being a highly risk averse trader I wont hold any open positions till the news has been digested. I certainly wouldn’t want to hold a long position when tapering is announced.

    Good luck all

    keep the stops in. They are your friends

    Trade safe

  6. Closed short from 6580 dont intend to trade the rest of the day, sht will happen today and i dont intend to be on the losing side…

  7. -9.3 points loss today. Working for b/e.
    I don’t really understand why Nick confuses everyone with his long arrows.

    2. I do get confused with my trend line, but he knows and still gives such a chart. I don’t get it.
      Went long at 6561 and closed on DCB at 6552.5. What’s the point?
      I know I should have gone short, but isn’t it a bit late, ah?

      1. I hope in members area he gives a quick update or change to his scenario and the people “on that side” are benefiting or those updates. We must be just unlucky bunch up here.

  8. Hi all,

    Time for Fed statement is 7pm UK time if you are waiting for it and questions and answers session usually 30 mins later. Just saw above that Nick said it was 6pm…wanted you all to save the hour so that you could ………… 🙂 Fill in the blanks….GLA trading…I’m off to do some errands and gym later. Can’t be asked to watch this fed circus play out again every month…..you will probably get a spike one way, then another spike a few minutes later in the opposite direction and in the final hour or half hour the ‘big boys’ will change the direction again to suit their ‘ends’ (positions) and CNBC as usual with their barefaced lies will be on hand with their commentary to explain the up, down, up, down gyrations in the markets and ‘all’ based on the single news event!! Watch those idiots faces…Art Cashin…Bob Pisani ..Maria Bartimoro try to explain the ‘irrational and unintelligible’ as they always do!!

    I intend to trade with a fresh hand tmrw, and have had a nice rest for the last 5 days.

    1. Good luck. Always good to have a rest and come back stronger. Try to put past dramas behind us!

      I tend not to watch CNBC – only for comic value really…..far too many shouty reactionary yanks for my liking – the worst of course is Santelli, and Cramer isn’t too far behind……but at least he wasn’t the inspiration for the Tea Party!

    1. Nah…..use it to your joy…lol….those morons over the pond will create a market crash condition and we will all pay for that!

  13. … just go long a 6.53pm for about 20 mins, then go short for an hour then long again, short al day thursday from 1pm, and keep going until 2pm on Fridy then shut down …. you cant go wrong, and ignore CNBC, Bloomberg etc

  14. My thoughts are for today that the fed will taper. They have to as there is no way to continue QE as it is.i think they have no idea what the effect of the tapering will be so they will reduce a little and watch the economy what will happening. Sort of experiment as it never happened before. My plan is for shirt term that today as soon they announce the size of the tapering the markets will drop then traders think and say “oh is not too bad it’s only X billions so we will be ok” and start buying so dip and rise. Medium term I believe that tapering will have a negative effect on the economy so a few days/weeks rise then a drop. I am a day trader mostly so I can’t tell the numbers for start buying or selling I will try to pick up the signals when they will be there but at least I know what signals I’m looking for.

  15. Lol easy Hubris try carrying that out, this is where us lowly traders get hammered, let the big bous have their fun

  16. Just gone long. A taper is built in and it will be gentle anyway. Gives certainty if nothing else. No taper and boom

  18. Bds. Spooked me out of my long with this false fall. Who cares now, maybe tomorrow I will manage to take finally a long which will bring me some profit. If it’s long, it’s long. It will rally tomorrow too.
    I noticed when it gets finally scary then it’s changing dramatically. I knew it was Fed and it was not going to be easy to get the right entry. So I am not getting in this game of big money now. Tomorrow small rallies will be fine for me.

  20. … I draw your attention to my post yesterday .. As I said no taper, this is a game pure and simple, the tricky call is after mad Ben speaks, more up or small retrace? Gut feeling says more gains through until midday tomorrow, no charts backing this up of course but I think we’ve been here before haven’t we? Taper now Nov earliest. 🙂

  22. .. I forgot to mention wait for the negative stories that will abound by tomorrow saying how poor the economy really is to cause the fed not to taper, that will confuse us all, then a drop, then relief on continuing QE, small windows to make money here, next week short for a 1% pullback at most.

    1. I am with you on that Hubris! I am waiting to hear the nonsense from the so called ‘experts’. Same BS, different trading day! 🙂

  24. 7000 by year end here we come. No reason for bit sub 6000 drops. I said at the beginning of the year we wouldn’t see sub 6000 for long and was mocked and shunned.

    1. Well looks like you ‘may’ be right John 🙂 Doesn’t mean we can’t drop some 500 point from now till Xmas, but unlikely..

  25. Hope this explains ‘some people think the market will kerp going up’ ADAM just hope you werent on the wrong side.
    PS congrats Nick you got it right where it counts and im happy got myself 50 points.

    Though bearishness towards the end of the week and beginning of next week is definitely coming. Especially with tuesdays weakness.

  27. Al no doubt as it now continued to march on but sometimes these spikes can disappear in an instant so was lucky to get the profit I did. Good luck all.

  28. NR the doubletop looks ever so imminent and BOOM we are into record levels for no more longs for me it would be scraping the barrel. I expect friday we will get the pullback as the higher they are the harder they fall, right…?

  35. Just watching CNBC and yet again the move up is on a very low volumes which would indicate that when the market drops it will be a carnage!

  37. 100 points in a blink of an eye. or a day.
    and I’m still waiting for my 60 points. That’s impossible.

  38. Glad I missed the circus! DOW 15700?? 🙂 Would be surprised if many bagged a few points from the 6570 to 6640 area indicated by the blue lines on Nicks’s charts if trading with the usual 20 point stop. Would be stopped out at 6450. Market low was about 6430. You would have had to have a minimum 40-50 point stop therefore to bag the rise…makes sense?

  40. Difficult to type on this new Samsung phone!

    Looks like that sly fox Bernanke leaked the word of no tapering to Wall Street last week, hence the near 800 point rally since NFP day just last Friday. Fine. I can understand today’s really,it is economically plausible, but the 800 move up in a week or so and nearly every day a triple digit move on no real news?? Syria deal was used on 1 day..fine…the rest of the rise?? They knew beforehand of the NO TAPER news…why on earth would you go long some 800 points on the DOW before the fed announcement? Otherwise it’s just a guess…pure speculation.

    Would love to see the profit and loss accounts of the big banks and hedge funds who went long since NFP day and made a killing on evidently a leak…would love to ask their CEO’s who pumped billions since last week going long BEFORE the fed announcement as to what their REASON was?? Get my drift? It could have gone the other way and they could have lost billions if they built up long positions before the announcement. It’s a fix and will never change..just like the flash crash and the 1500 intraday moves we saw in the dow a few years ago in August. Dow up 500
    ..dow down 500..dow up 500 by close…:-) The circus continues. Did you know up to about 65% of all trades are now done by HFT?

  43. One last point…just shows you that it is pointless trading the data etc regards QE and tapering because you do not KNOW if the Fed interprets the data the same way as the traders/investors/pundits/experts. Just look at today…based on the recent data all were expecting tapering!!

  46. Last one promise! Just read Daily Telegraph (Phoebe Praill). Citigroup predict FTSE 8000 by end of 2014. lol…

  47. I can see that Ray. The economy will continue to improve (or they will continue to tell the media it is) and the Fed will keep pumping. Then in 2015 the cards will collapse and it will be 5500 again!

  49. My strategy on the DOW last night worked for a change. As i was expecting a big spike whatever the decision i set 2 orders both 20 points apart from the current price. One short and one long. When it rose so much i got triggered at 15520 and then i got the rise in to the 16000’s.. I then sold, but it kept going up 😉 So made some of my losses back.

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  51. watch for the next big “market push” minimum 1% when they announce the appointment of Yellen, even though we all know thas a done deal !! of course Bad Ben could always hang around for another year …. now there’s a thought any takers? 🙂

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