The FOMC interest rate decision is due at 14:00 ET in the US tomorrow ( Wednesday, Jan 28th ).
FOMC days have different characteristics than other trading days. If you have traded for a while, check your trading notes from past FOMC days that may help you prepare for tomorrow.
if you are a newcomer, take a more conservative approach and make sure you understand that the news can really move the market.
The following are 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 2035.00 with a stop at 2029.00, instead “stretch the price bands” due to volatility and place an entry order to buy at 2029.75 and place a stop a few points below in this hypothetical example.
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.
Know what the market was expecting, learn what came out and observe market reaction for clues.
This is another great example why a trading journal would be an asset, as you can go back and check your notes from previous FOMC days.
The European Central Bank launched a quantitative easing program of its very own this week, pledging to expand its balance sheet by at least €1.1 trillion via purchases of Eurozone sovereign bonds. The ECB move had been extremely well telegraphed to markets but European equities rocked higher and the euro tanked on the news nevertheless (the EuroStoxx50 gained 5.6% on the week, EUR/USD plummeted to 12-year lows). The Shanghai and Hong Kong indices saw robust gains as the mixed 2014 Chinese GDP report gave investors hope that more PBoC easing might be right around the corner. More current data only highlighted China’s slowdown: the January flash HSBC PMI reading suggested manufacturing could contract for a second consecutive month. In the US, equities made back most of their losses from last week and the 10-year UST yield consolidated below 1.85% while many European government bond rates hit new lifetime lows after the QE announcement. Markets also digested an influx of corporate earnings reports and 2015 outlooks. For the week, the DJIA added 0.9%, the S&P500 gained 1.6% and the Nasdaq rose 2.7%.
The ECB will purchase €60 billion of sovereign debt from Eurozone member states every month until at least September 2016. The program may very well go on longer, until, as Draghi said, “we see a sustained adjustment in the path of inflation.” In a concession to German QE skeptics, both the ECB and member national central banks will buy bonds, sharing the risk of default. The Germans were hardly appreciative: Bundesbank President Weidmann rejected the new QE program and said it would be very challenging to hike rates when they were needed. The euro plunged after the announcement, with EUR/USD testing the lower end of 1.11, for 12-year lows. Some analysts suggested EUR/USD could go to parity soon. Yields on peripheral Eurozone debt plunged to all-time lows, while the 10-year bund yield dropped to a record low of 0.353%.
Less than a week after the Swiss National Bank yanked away its euro peg, markets were surprised by another central bank as the Bank of Canada unexpectedly cut its key rate just a day ahead of the ECB QE announcement. The Bank of Canada cut rates 25 basis points to 0.75% justifying the move on grounds of falling oil prices and slowing reduction of excess capacity. Less surprisingly, the Danish central bank cut its deposit rate to -0.20% and its lending rate to 0.05% to offset the ECB action. Meanwhile the minutes of the last Bank of England meeting revealed a big shift on the MPC: two former hawkish members changed their policy stances, saying the bank should hold off on rate hikes due to prolonged low inflation.
In hindsight it always looks easier…ECB announces QE – “We should have known it was going up….” In reality the market was very jittery to start the cash session with some very sharp moves lower before it started running up and up….
I think that when this is all said and done, one day down the road, the end result will NOT be pretty for global markets but until then we need to trade what there is and not what we think should be…..
My medium term outlook on Silver Futures as featured in ForexMagnates.com available at:
ECB decision and verbiage in regards to Euro Zone QE will move the markets early tomorrow morning ( 7:30 AM central time). Be aware and be ready.
We got a sneak preview today when some reports came out in regards to this matter.
VOLATILITY is the keyword today and the last few weeks.
Personally I think this market has been harder to trade.
Do your homework. Review the charts over different time frames.
Do you need to adjust entry techniques? Do you need to use LESS leverage? Perhaps your stops needs to be adjusted based on volatility?
i am just throwing some ideas out there to help you think, research and hopefully implement and adapt to what I consider a different market for day trading than we have seen for most of 2014.
In between I am sharing with you my Crude Oil 18 tick range bar chart from today with some good and some not so good signals for your review:
CLE – Crude Light (Globex), Equalized Active Continuation : Range Bar, 18 Tick Units
Would you like to have access to the DIAMOND and TOPAZ and 5T ALGOs as shown above
and be able to apply for any market and any time frame on your own PC ? You can now have a three weeks free trial where the ALGO is enabled along with few studies for your own sierra/ ATcharts. The trial comes with a 23 page PDF booklet which explains the concepts, risks and methodology in more details.
Swiss franc made a huge move today as Swiss officials decided to detach the Swiss rate from the Euro currency….This was probably the biggest one day move I have witnessed in any commodity/futures market percent wise in my 17 years as a broker ( at the high today it was up approx. 25%, closed up 17%!!!)…..
Monthly chart below for general knowledge below…
SF6 – Swiss Franc (Globex), Monthly Continuation
And repeating yesterday’s words below as today was even a crazier day than any so far…..
VOLATILITY is the keyword today and the last few weeks.
Personally I think this market has been harder to trade.
Do your homework. Review the charts over different time frames.
Do you need to adjust entry techniques? Do you need to use LESS leverage? Perhaps your stops needs to be adjusted based on volatility?
i am just throwing some ideas out there to help you think, research and hopefully implement and adapt to what I consider a different market for day trading than we have seen for most of 2014.
Our blog is nominated for the STAR award once again!
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
If you like Our Futures Trading Daily Support and Resistance Levels, Please share!
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading.
Very volatile day in stock index futures and energy markets along with grains and a few others….
30 minutes ago I was planning to write on how today’s action may be a bearish signal but then stocks rebounded to close near the unchanged level and lead me to believe that we still need to see a decision day/point where either the bulls or the bears take the market sharply higher/ lower….
Mini Russell 2000 daily chart for your review. My opinion is that the Russell been some what of a leader in the volatile moves we have seen.
Wide range today and I am tempted to say, I would be on the sidelines waiting to see if we can break above 1200 or below 1162 before having a directional bias for the short-medium term.
TFE – Russell 2000 Index Mini, Equalized Active Daily Continuation (Delayed by 10 Mins.) : Heikin-Ashi
Global equity markets were racked with volatility this week, as competing economic themes vied for dominance. Monday and Tuesday were dominated by concerns about the increasing risk of European deflation and the euro zone potentially unraveling over a renewed Greek crisis. The risk on tone was restored on Wednesday as Chancellor Merkel gave assurances that Germany wants Greece to stay in the euro. Mid-week sentiment was also helped by an Obama Administration announcement that the FHA would dramatically cut its mortgage insurance premiums in hopes of kick-starting the still anemic housing market. Fed policy minutes reinforced the stance of “patience,” while the new slate of dovish FOMC voters flexed their wings, highlighted by Chicago Fed President Evans who proclaimed that raising rates before 2016 would be a “catastrophe.” By Friday, deflation fears were setting in again, as Brent crude hit fresh 5-year lows and the US jobs data showed that last month’s signs of nascent wage inflation had evaporated. The US 10-year yield retreating back below 2% signaled increased investor anxiety as the week drew to a close. The DJIA notched five straight triple digit moves and for the week fell 0.5%, while the S&P500 dipped 0.6% and the Nasdaq lost 0.5%.
The headline US jobs data showed better than expected payroll gains and another tick down in unemployment to 5.6%, but dissection of the report focused chiefly on the disheartening hourly earnings component. The very healthy November gain in wages was cut in half by revisions (to +0.2% from the preliminary +0.4%), and December hourly earnings were -0.2% m/m. The data pulled the y/y growth rate to its lowest level in more than two years (+1.7%). Note that the Fed is on record with its desire to see wage growth accelerate to +3% y/y to help it achieve its 2% inflation target.
The FOMC minutes out on Wednesday confirmed that if the labor market continues to heal, then the Fed is likely to raise rates in the middle of the year even as they remain “patient” on hikes for now. Many analysts say higher rates are likely to happen even if there is little progress on inflation. The WSJ’s Hilsenrath argued that a case is to be made that lower long-term yields may even push the Fed to hike sooner, given they could be a sign of global funds flowing into the US economy and away from anemic overseas markets, potentially inflating various asset bubbles.
I wish you and your family a happy, healthy 2015 and of course a successful trading year in 2015!!
Hello 2015….Volatility and downside pressure are the dominate force to start the new year, however we have seen this before more than a few times in the past only to witness the market rally fast and big within days….The million $$ question,: Is this correction any different or is this a buying opportunity….Must admit I have no clue…..
I think a break below 1978 can trigger a move down to 1909. If the market can hold and stay above 1978 we may see a run back towards 2046.
Regardless of this medium term outlook, the main thing for most of you day traders out there is that volatility is back, the pressure is now even going both ways (long and short), the ranges are wider, the moves are faster and one needs to adjust their day trading accordingly.
Daily chart of the mini SP 500 for your review below:
EP – E-Mini S&P 500, Equalized Active Daily Continuation
RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.
