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Today’s the day the market’s been waiting for: the Fed’s rate decision.
After a week filled with speculation, volatility, and mixed signals from retail sales data, it’s time to see how this all plays out.
So far, the market has been riding a wave of anticipation, closing above key levels and flirting with new trends. But the big question on everyone’s mind today is: What’s next?
Well, despite yesterday’s brief all time high, we’ve seen the market churn, looking for direction, and a lot of that churn was due to speculation about what the Fed will do.
Yesterday, I discussed how retail sales figures showed mixed signals, adding another layer of complexity to the market's outlook.
Now, with the announcement just hours away, we’re about to get the clarity we’ve been craving — or at least a glimpse of it.
How the Market Could React
If the Fed cuts rates, we might see a surge of optimism, with stocks potentially rallying off the back of that news. On the flip side, if the Fed holds steady or doesn’t deliver a “big enough” cut, we could see a sharp market correction.
In these final minutes leading up to the announcement, I’m watching the market closely. Volatility, as measured by the VIX has already spiked today. Will it continue after the Fed announcement or continue spiking? In the middle of this increased volatility is where traders can find opportunities.
No matter what the Fed announces today, the market's initial reaction is just the first act. The real story will unfold in the coming days and weeks as traders digest the news and decide on the market's next direction.
Keep an eye on the S&P futures; how they close today will give us some clues.
If we see a rally that pushes us beyond the recent highs, that could signal a new uptrend. On the other hand, if the market pulls back sharply, it might indicate that more volatility is on the horizon.
Playing the Volatility
Yesterday, I recommended members in my Profit Links program buy a SPY call and a QQQ put, both slightly out-of-the-money and both expiring about 2 weeks ago.
Out of respect to my paying members, I can’t post the exact trade, but that should give you an idea of how I’m playing this volatility I’m expecting.
Today, with the market not having moved very much yet, we’re about breakeven.
I expect that as soon as the Fed announces their decision, markets will go nuts in one direction or the other and one of those trades will pay off big time.
Whether you decide to take a trade or not, keep an eye on the market and watch how it reacts. It’s a great opportunity to learn how to play volatility during events like today’s Fed announcement.
— Geof Smith
P.S. One thing that I’m not worried about is nuclear. No matter what the Fed announces, I see a surge in nuclear coming and here’s exactly how I plan to play it. | | | | |
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