September FOMC Is Here: Brace for Market Turbulence

federal reserve, ben bernanke, fomcAll is quiet on the western front as the markets prepare for the results of the September FOMC meeting and ensuing Fed statement. Reality is, many market participants are thinking through all the possible variations in Fed wording and possible market reactions. Yep, pretty standard for Fed week.  BUT, the September FOMC meeting layers in one additional variable: Tapering.

To taper or not to taper? To taper a little or a lot? Either way, the “crowd” will take some time to digest the Fed statement, likely freak out, misdirect the masses, before finding some direction.  Should be fun!

Below are a couple of charts that highlight some of the bottled up energy (and uncertainty) in the markets. With the S&P 500 testing its all-time-highs, many will be looking for a breakout. But the “event” risk is high, so traders should likewise beware of a “fakeout” (or a few successive fakeouts!).  A move above 1710, could bring 1730 quickly (and should this happen, I’ll be watching the price action for indications on how the markets digest new highs). On the flip side, a move below 1690 could find 1675 quickly (notice the gaps).

Yep, looks like a mine field for guessing games. My style is to remain patient (if there is such a thing for traders), and wait for solid risk/reward setups.

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september fomc meeting, stock market analysisTurning to the Volatility Index (VIX), you’ll notice the large open gap below. This has been supportive over the past week, indicating that traders aren’t exactly sure what the Fed will do. Enjoy the September FOMC folks. Trade safe.

Also read Andrew Kassen’s post on A Possible US Treasuries Rally out of the September FOMC.

vix analysis into september fomc meeting
  @andrewnyquist      @seeitmarket

No position in any of the mentioned securities at the time of publication.  Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.