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How to Trade & Survive Fed Day


At 12:15pm et today the FOMC is expected to release its latest statement on monetary policy. The instant the Fed posts the statement it will be read aloud in its mind-numbing entirety then combed over, parsed and interpreted until the every last pundit on earth has had their say.

It's all a waste of time and energy. We already know what the Fed is going to say and we've all seen the same rally in stocks over the last two weeks. Here's everything you really need to know so you can get proactive this morning and play hooky this afternoon.

What the Fed Will Say:

"The economy is getting weaker. Europe is a headwind. Our lack of fiscal policy is bad. Unemployment is horrible and getting worse (but might be a little seasonal). There is little to no inflation. We are a coiled spring of monetary stimulus. There could be more Operation Twist, QE3 and anything else we can think of. Stimulus is on the table (but not yet)..."

Continuing Operation Twist is expected but not all that important. Another round of Quantitative Easing will only happen in the bulls' dreams. Whatever the Fed may or may not do, they have no power to cure what really ails the economy.

Here's the last Monetary Policy Release. Less than 50 words will be changed in today's statement.

Market Technicals: The Field Position

The S&P 500 has rallied 7% since the intra-day lows hit on June 4th. It has run straight into previously noted resistance around the 1,350 level. The "book" says traders should take at least partial profits here.

Being bullish has been a great trade. Unless you're a dyed in the wool "hold forever" type this would be a nice morning to book some gains. The Fed really has nothing to do with it.

How to Invest on Fed Day

None of the following is advice but I would play it as follows:

* Take gains ahead of the release. What stocks do after the statement is a crap shoot. It's random. Make your moves before 12:15pm if you're going to do anything at all.

* Ignore the initial reaction. The market is famous for jerking hundreds of points on FOMC headlines. Ignore the bouncing or watch it out of curiosity, but don't trade it.

* Don't do anything. I cannot emphasize this enough; today is a splendid opportunity to do nothing much at all with your investments. Stocks will still be here in the morning.

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