by John Thorpe, Senior Broker

Many of you are purely technical traders and for good reason I understand why. It’s also critical to understand why there, from time to time, become sharp price deviations from your technicals that many times are simply one offs but sometimes can result in longer term trend shifts. It’s always important when trading Futures and Commodities to look past the headlines and beyond indicators and respect the weekly economic calendar. I Extoll the virtues with my clients and through this Blog the importance of knowing the markets you trade and the reports that Government agencies around the Globe generate at every opportunity I have with them . If you are trading Grains, ZS, ZW, KE, ZC, ZO, ZL, ZM monthly WASDE release dates , Planting Intentions and Weekly sales numbers are a few examples of reports that are released during trading hours that you need to be aware of, If you are trading Bonds, ZB Notes, ZN, Stock indices, S&P 500 ES, MES , Nasdaq 100 NQ, MNQ or trading any of the foreign currencies there are reports and Meetings that occur on a regimented basis that clearly impact your ability to manage risks to your satisfaction.. please, if you are new to this part of trading, don’t know where you can get this information readily, , there are services, Calendars and other resources your Broker can help you with. Just contact your Cannon Broker, She or He will be happy to share solid, respected sources so you don’t fall into a margin deficiency trap as a result of some unforeseen event that other traders were aware of and were able to plan accordingly to either become Flat, place appropriate stops, spread off the risk or utilize option strategies to avoid potential turmoil in your account.

The Federal Reserve is expected to say this week it is moving forward with interest rate hikes and considering other policy tightening, reversing the easy policies it put in place to fight the pandemic. The Fed begins its two-day meeting Tuesday and on Wednesday afternoon, the central bank is expected to issue a new statement that shows it is resolved to fight inflation. Against the backdrop of a violent stock market correction, Fed officials are expected to say they are ready to push up the fed funds rate from zero as soon as March.

The following are my PERSONAL suggestions on trading during FOMC days:

·    Reduce trading size

·    Be extra picky = no trade is better than a bad trade

·    Choose entry points wisely. Look at longer time frame support and resistance for entry. Take the approach of entering at points where you normally would have placed protective stops. Example, trader x looking to go long the mini SP at 4325.00 with a stop at 4319.00, instead “stretch the price bands” due to volatility and place an entry order to buy at 4319.75 and place a stop a few points below in this hypothetical example ( consider current volatility along with support and resistance levels).

·    Expect the higher volatility during and right after the announcement

·    Expect to see some “vacuum” ( low volume, big zigzags) right before the number.

·    Consider using automated stops and limits attached to your entry order as the market can move very fast at times.

·    Keep in mind statement comes out at 1 Pm Central time, the news conference which dissects the language comes out 30 minutes later so the volatility window stretches out.

·    Know what the market was expecting, learn what came out and observe market reaction for clues

·    Be patient and be disciplined

·    If in doubt, stay out!!

If you are looking for other reference material please contact your Cannon Broker for lists of solid, informative and helpful trading tomes