We’re just one day away from an all-important FOMC meeting interest rate decision…
… the two-day meeting begins today.
It’s expected that after the announcement the Fed Chairman, Jerome Powell, will host a press conference.
All eyes and ears are on the language the Fed will be using at this meeting. As of now, the market is expecting a more dovish Fed… and an interest rate cut in July.
I study the way money flows… and in my decades of trading… there is no one bigger and more influential than the Federal Reserve Bank.
(Some of my best trading days happen around a Fed meeting. You’d be surprised at how many ETFs and volatility ETNs that can be traded to “make bank.” Not receiving my trade alerts in real-time? Change that now!)
And from a trading perspective, there are so many ways you can play a Fed event (before, during, and after)…
However, if you’re unable to pick up on their clues then you could miss out on some of the best trading opportunities left in 2019.
Want to know what I’m looking at for June’s FOMC announcement…and potential plays I’m cooking up?
Continue reading below.
FOMC Meeting Watch
Well, it’s that time again…
… the Fed starts its two-day meeting today, and the markets will be keeping an eye on the 2:00 PM EST Meeting Announcement tomorrow (the rate decision) and economic projections for the year.
Not only that, traders will be listening in on the Fed Chair Press Conference at 2:30 PM EST.
Now, remember, the first move is generally the wrong move. There’s going to be a lot of action in stocks, the iShares 20+ Year Treasury Bond ETF (TLT), SPDR Gold Trust (GLD), iShares Barclays 7-10 Year Treasury Bond Fund (IEF), and VanEck Vectors Gold Miners ETF (GDX).
I’ll be keeping an eye on TLT, GLD and GDX options, as well as some options on gold stocks… and I’ll be sure to let my clients know if I make any moves.
For the most part, I’m going to remain patient because I know the market needs time to digest the news.
So what are we expecting?
Low Probability of A Rate Cut
As of yesterday’s close, the Fed Funds Futures are only indicating a 19.2% chance of a rate cut… in my last post about the Fed, they were indicating a 27.2% chance of a rate cut.
Can the Fed surprise the market and cut rates?
I wouldn’t put it past the Fed.
However, chances are it’s not happening.
Now, we’ve seen the Fed go from slightly hawkish to dovish very quickly… and traders will be looking for specific language the Fed is using, as well as its projections.
My thinking is the Fed would remove the word “patience” from its guidance release. Fed Chair Jerome Powell will have to finesse this one because any wrong word… it could send the markets lower.
Fed Chair Powell may look to reiterate his stance a few weeks ago (which sparked this massive runup in the market) – indicating the Fed will be ready to act if necessary.
Right now, inflation is the main concern with the market.
The Fed may give us clues as to where they think inflation will be for the year (they should provide us with forecasts for GDP, PCE price index, and unemployment). With inflation falling, the Fed will most likely leave the door open for a rate cut in its July meeting…
I’m going to be listening closely when it comes to inflation talk.
Now, with Friday’s retail sales number coming in slightly stronger than expected… we’ve seen Treasury yields tick back up and the dollar rebound… and it puts the FOMC in a tight spot.
You see, if retail sales actually came in weaker than expected, it would bolster the argument for a rate cut.
With that new reading… the markets may have placed too much faith in the Fed…
… just look how far the market has run since Fed Chair Powell noted the Fed will step in if need be.
If you look from June 4 until yesterday… the market has ran over 5%, but struggling to find a direction currently because traders are all sitting on their hands, waiting for what the Fed has to say.
We’ll have to wait and see with this one.
With this meeting, there’s probably not going to be a whole lot of focus on the actual decision… and traders are already looking ahead to the July meeting.
For example, if you look at what the Fed Fund Futures are indicating, according to the CME Fed Watch Tool… the market is pricing in an 84.3% chance of the Federal Open Market Committee (FOMC) cutting rates at the next meeting.
Now, like the Fed… I’m data dependent.
However, the market may be overly optimistic about a rate cut… Fed Chair Powell knows the way the economy works and knows the dangers of cutting rates at these levels.
I’m going to wait to see what the Fed says and dissect the announcements and speech… potentially spotting plays in TLT, GDX, GLD, SPY and QQQ.
That said, I’ll be letting my clients know about any moves I make around the Fed… and they’ll be able to see my live-streaming portfolio. Now, if you’re interested in receiving real-time alerts, access to my live-streaming portfolio, hours of video lessons on options trading… click here to get started.
If that’s not enough to satisfy your options trading needs… 5 traders and I started the Options War Room… click here to learn more about it.
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