One the toughest days to trade is the day that the Federal Reserve Open Market Committee (FOMC) announces the results of its two day meeting. In fact, I know many traders that do not try to trade it from 2:00 until the close. It is too tricky.
In fact, we had an open position in Gold & Energy Options Trader with S&P 500 Calls and Geoff closed them out at 1:20 p.m. EDT with a small gain of 2.28% just to be on the sidelines. This trade was put on Monday with the goal of being gone by the FOMC announcement and he was. One thing I love about Geoff is that he sticks to his game plan which is the sign of a true pro.
There are a couple issues behind this particular meeting as well as any FOMC meeting that investors need to be aware of.
First, is the meeting going to end with just a release of the outcome and a statement? Or is there a press conference as well like we had today? The idea of a press conference is recent and it seems that markets are learning how to respond to the give and take of the press conference.
Today the Federal Reserve raised rates by 0.25% pushing the range to 2.00% to 2.25%. At year end, they indicated that another 0.25% was coming at year end. The plan for 2019 is to raise rates to 3.00% by year end so another three rate increases.
As such, the risk here is that bond yields rocket and that causes a shifting of asset classes held by investors. This may lead to sector rotation as well within equities. Therefore, tomorrow's action will be key to watch.
Futures at 7:35 p.m. EDT are +2.00 on the S&P 500.