Today was Fed day, with all ears waiting hear whether or not there would be additional stimulus. I came into the morning thinking the Fed would continue to delay a stimulus decision, but also knew that they could announce new stimulus. Either way, it was a recipe for a potential trend day as I posted in chat early this morning:
“Expectations that the Fed will offer stimulus today are high and already priced into the markets. Thus there is more downside potential than upside potential. In the past (i.e. QE1, QE2, operation Twist), the Fed announced stimulus near market lows. The markets are near their highs now, so I’m guessing the Fed will hedge a stimulus announcement with the same old rheteric; they’ll do what necessary in the future if needed… Basically a not now, maybe later… This would be negative for the equity markets…
However, the Fed certainly could announce stimulus today which would send the markets to new highs… Be aware that volatility could get very high. It’s these type of days that I expect trends to develop and look for places to get on… It’s not a day for conservative traders to try and pick reversal areas.”
Today’s example trade is a trend pullback into a DTG level, a place to get on a trend. After the announcement, the ES actually made 2 good pullbacks, but the first was still during high volatility. The second is today’s example trade.
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