Crucial Day After Signals Moves

Hey Market Pilots,

The Federal Open Market Committee (FOMC) minutes were released yesterday and when this happens, sometimes the market can get very “exciting”. The excitement comes in because we don’t know how the market is going to react to the sentiment from the Fed. Often, I’ve found, it’s not the moves two hours directly following the announcement that are telling, but instead it’s how the market moves the day after.

So by the time you are reading this, we will already know how the market has decided to digest the report. Several times the initial move right after the minutes and into the close is not the true sentiment of the market. I even had a recent experience to keep me alert about this characteristic. On March 17 the market moved up with strength after the Fed release. I am sure this led many traders, including myself, into thinking the market was happy with the guidance and it was a fine time to go long.

However, the market had other plans the day after. It spent the day chopping while most tickers below the surface continued their ways lower. It has been a general rule, after having learned this lesson a few times, to wait for the FOMC minutes to be digested by all participants overnight and see how the following day goes. The market has demonstrated to me that the next day is an important marker for the market.

So, I’m sitting tight with my current positions, waiting to see where the market is headed. After the close, we can assess where it is best to move money and our focus. Hopefully the dovish and accommodative stance is still viewed as exactly that and we can work on repairing the high-beta names I love to trade.

Your Profit Pilot, TG.


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