Fed Day

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(click images to enlarge charts)

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The US Midterm Elections were completed yesterday and the House of Representatives is now controlled by the Republicans, with the Democrats retaining control of the Senate.

At 2:15 pm today (New York) we will get a key post-election FOMC announcement.
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From Bloomberg/Econoday

Market Consensus Before Announcement

The FOMC announcement for the November 2-3 FOMC policy meeting is expected to leave the fed funds target unchanged at a range of zero to 0.25 percent. Market focus, however, will be on how much the Fed decides to expand its balance sheet in a second round of quantitative easing. But in recent days, more analysts and economists following the lead of some Fed Speak dissension-have questioned whether additional expansion has more costs than benefits. There is plenty of room for a Fed surprise in what it chooses to do.

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Back in July, when Stops and Targets first locked on to ES 1203 as an upside target for all three time frames. It seemed very far away and improbable that the market would turn and climb as it did from the vicious April sell off…but, here we are, within a few points of that target and 200 points above that spotter low.

The Fed announcement is being eagerly anticipated by many, and there could be quite a bit of speculation and outright gambling taking place in advance of that policy decision.

It has been said that the market often does the most obvious thing in the least obvious way and so it would not be surprising to see some treachery ahead as the pros take advantage of those placing large bets in this extended run.

As I mentioned yesterday, the two main targets to my eye are the bear stops above 1207.75, which would likely be a capitulation point for many bears…and the trailing bull profit stops under 1155.50.  That is a 50+ point range and so we could see some volatility ahead, and any number of potential combinations of moves to get to one or both of those targets.

Those who have been playing this rally leg correctly using Stops and Targets from the 998 bottom spotter alert and at the successive buy signals since, have huge gains locked in here.  The short-term primary trend line is at 1170.25 and represents the point where ES bulls would ring the register to take profits, should selling occur.  Most retail traders likely missed this run-up (as usual) and many may be looking to enter here, at a point where gain to risk ratios are extremely poor and where smart traders are looking to take/protect profits.  That identification of opportunity and for application of sophisticated risk management is the real beauty of Stops and Targets.

All trends remain up > 1170.25

I have posted a series of daily charts to show the trending configurations for several futures contracts for comparison ahead of the Fed Announcement.  From top to bottom the order is ES (S&P 500 Futures), NQ (NASDAQ 100 futures), YM (Dow futures), DX (Dollar Index futures), and YG (gold futures.  Many eyes will be on the US Dollar today after the FOMC announcement.  It is interesting to compare it side by side with the other index options and with gold.

I have also posted the hourly bar chart for ES showing the zoomed in location of the ST trendline resistance and support lines.

…my .02