After another yawner of a trading session yesterday, Tuesday July 30th, today we enter the last day of the month and the first of three central bank rate decisions this week. The FOMC announcement isn’t scheduled to hit the wire until 2PM ET, which means until then the snooze fest is likely to continue. For those looking for a quick trade post the interest rate/tapering/whatever announcement, beware that the first move often is a fake-out, only to rip in the opposite direction. In other words, patience, ore often than not is rewarded on FOMC days. Sometimes it even takes until the next morning for the tape to find true direction. The issue with the timing of this week’s FOMC announcement however is that it doesn’t only coincide with other central bank interest rate announcements, but also with the July jobs report. So, just as traders digest the FOMC announcement, they need to prepare for Friday’s jobs report.
All of this sounds hectic and to some, potentially somewhat exciting. Considering what’s at stake however (hard earned money), where we are in the broader market (a steep nine month rally) and the time of year (summer choppiness), I would offer that taking the high road may just be the route to take this week. The most difficult skill I had to teach myself as a trader was to remain patient. In principle, it’s a simple thing…just wait for a trading setup to arrive, then pounce. The markets being as they are however have their way of making all of this tricky. Not a day goes by when I miss a trading opportunity that I had on a watch list. In the past I used to fume over these ‘missed’ opportunities, but now I know that THERE WILL ALWAYS BE ANOTHER TRADE. Additionally, often the times our losing trades are ones we are chasing, well past when the original signal came. This could be just such a week, when jumping the gun, or chasing a missed trading opportunity could cost us much more, both financially and mentally, than we otherwise are willing to risk. Stay patient my friends.
The five day chart of the S&P 500 looks just as boring as it felt sitting in front of the screens. The immediate term range is capped by 1690 on the upper end and supported around the 1675 – 1680 area. I fully expect the index to break out of this range later this week, the question is whether we break above 1700 before ultimately settling into a meaningful mean-reversion trade to the downside.
Lastly, note that the Nasdaq 100 EFF (QQQ) is a tick away from breaking to new year to date highs, all however within the context of slumping momentum.