The entire civilized world and the global markets may cease to function after Wednesday, October 29th. Traders, bankers and financial "experts" will be carefully reviewing the FOMC's decision on whether or not to finally end QE3 and raise rates sooner rather than later. To some this could be the end of easy money. But the main question still remains, "Will the markets break or will it just shrug it off?".
In this ridiculously erratic market, traders big and small have to really be nimble. Make a big outright trade prior to the news and you could see yourself out of the game quicker than you can say, "QE!!". Quickly glancing over several blogs this weekend, everyone is already predicting that the markets will react to the FOMC announcement negatively and would test key supports.
My opinion? I just don't care. Period. Whether they do another round of QE, extend it or cancel it - it does not matter. This is how you should also treat any FOMC event. Don't try to game this market or it will take you out. It's better to wait after an announcement and take stock of what the markets are going to do. Once the markets show you what they want to do go with that. I never understood contrarian thinking. This belief of fading rallies and buying sell offs - it's all a bunch of malarkey.
This FED has been shown to support the markets time and time again. If I were to make a move prior to the event I'd rather be wrong by going long than try to short and be right. There's almost a good chance they will do something or at least put some hopeful words into that rate decision to make everything feel happy. I would have been more confident that they would do something had we not bounced from 1820 and would still be there right now. However because by multiple mentions of the word "stimulus" we are at this wonderfully critical juncture and now we have to try to make sense of what will happen next week.
So I am not going to bore you with charts and statistics. I am not going to put up the AAII chart or the CBOE Put/Call Ratio or where the Russell 2000 is going to indicate where we could go. The markets went down furiously with significant volume and came back up this week with humorous volume. If that does not show you how ridiculously stupid the markets are - I do not know what will. There was a saying my old boss once told me, "Don't act sane to insane people because you will never get what they are doing." I think this holds true.
May the odds be forever in your favor my friends!