Traders Corner   11 comments

The technicals have cleared the way for the Federal Reserve decision today (taper or not?), so whatever sentiment the market has can take over. What are the good and bad sides of any Fed decision?

First, let’s look at the expected: A small taper, perhaps about a $10 billion cut in QE, to $75 billion. That is still a pretty good sized money-pumping every month. The general expectation is if the Fed does this, they will be less likely to taper any more until next summer, unless the economy starts to surge. The “common wisdom” is that most Fed actions take about 6 months to appear in the economy, which is when we would look for the next taper. Regardless, I see this as a macro “buy” signal.

Second, the next best possibility seems to be the Fed does nothing, maintaining the status quo. This still leaves the possibility of a taper in January, so it isn’t terribly different than the first possibility. However, I would expect a monster rally on this news.

Third, what if the Fed does a much larger taper? Say $20 billion or more? While nobody is predicting this, it could crash the markets, since it is unexpected. I would rate this a low probability event, which could lead the Fed to retract their taper if the markets fall too far and too fast.

Fourth, what if the Fed increases QE? Highly doubtful, but it would goose the markets significantly.

Buying UPRO here is probably a safe bet. But I wouldn’t hold it beyond tomorrow, because the markets could turn south after the “Fed effect” wears off.

The S&P 500 levels to watch today:

UPSIDE: 1786-1788 (3 data points), 1792-1803 (7 data points and the 20 day moving average), 1806 (2 data points), 1808 (December 10th’s high), 1810-1811 (2 data points), 1813 (November’s high and the all-time high), and 1815 (top of the Bollinger Bands).
LAST CLOSE: 1781, inside the 1779-1783 (5 data points) range.
DOWNSIDE: 1777 (2 data points), 1775 (October’s high), 1772 (2 data points and the bottom of the Bollinger Bands), 1765 (50 day moving average), and 1746 (November’s low).


11 responses to “Traders Corner

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  1. Morning Ed…

    Do you remember the silver company’s name where you bought the coins for your daughters?? Was it APMEX?? Looking to buy some for my nieces and nephews this Christmas…thanks a bunch!

  2. sold my aapl this morning for 550.25. Nice gain and I’ll buy back in if it drops below 525.

  3. I added TQQQ (the technicals looked a little better on the Nasdaq 100 than on the S&P 500) at $111.55. I will sell it at $117.12 today, or best price if it gets close. There is an outside possibility I might carry it into tomorrow.

  4. Is anyone planning to do anything this afternoon if there is volatility (either up or down) after fed announcement? I view the entire thing as a non event, meaning it really does not (in my mind) change the real value of my stocks. At the margin, earnings are worth less as you have higher discount rates to think about net present value of earnings stream. But tapering is going to start, it is just a debate over now or in the next three months.

  5. Jeff, GTAT is on sale with your price target. 🙂 8.26

  6. I sold TQQQ at $112.67, for a perfect 1.00% profit. Ok, I got greedy…

  7. Any thoughts on buying TC?? Anybody??

  8. Thanks a bunch…have a nice evening!

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