The FED Wins Again

A few weeks ago I wrote a post called: " Alibaba marks stock market highs?"

In that post I mentioned that statistically the odds are against that statement since then Alibaba (NYSE:BABA traded above the $100 mark recently....)...While we did not make new highs, we did bounce SHARPLY from lows made 2 weeks ago and as we head into tomorrow's ( Oct. 29th ) FOMC statement, it should be an interesting intersection.....Will stocks break new highs? Will they fail at old highs and resume downtrend?

Many factors are influencing our stock market (CME: NQZ4). On the objective side, earnings have been better than expected on many stocks, European banks have mostly passed ( with the grade of D....) the European stress test and we heard some talks about QE4.5 in the Eurozone.

Bottom line is to figure out the FED game plan and try to ride along....Analyze tomorrow's statement carefully, actually better off, research and find a good source that does that and "place your bets" accordingly. If the statement provides more proof that QE is over and steps are taken to unwind QE then I would look at buying some put options in the NQZ4. If the language is vague or offers "backup solutions" then that means the FED is still scared of the economic data and may feel the need to provide Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term in light of the recent stock market "mini crash" and will try to support it, if that is the case stay patient or even look to go long with the protection of put options.

Daily chart of the mini NASDAQ 100 below. It looks like path of least resistance is towards the 4195 mark/ psychological 4200 level.

Learn from price action these past few weeks and be ready for expanding and compressing Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term which affects the action intraday and should be a factor as you try to prepare a longer term game plan.

My bet is still the one from a few weeks ago...while the odds are higher than 4 weeks ago for a continued uptrend, the probability for sharp moves are still favoring the downside.

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About Ilan Levy-Mayer

Ilan Levy-Mayer has been a commodities broker for over 15 years, and holds an MBA in Finance and Marketing from Hebrew University in Jerusalem. Ilan is currently the Vice President and a Senior Broker at Cannon Trading Company.

Take a step in the right direction and contact me today, Toll-Free: 800-454-9572 or direct: +310-859-9572. You may also directly e-mail me, Send mail.