Trading the FOMC rate cut...if there is a cut.

FOMC announce tomorrow at 11:15am Pacific Time. Based on Cleveland Fed probabilities I calculated the market expected value as you can see its about 45 BP. This is up from about 42 or so a few days ago, even though the likelyhood of a 75BP cut has dropped significantly.
So how do you trade the event? ...Or how am I going to trade the event.

This Fed gives the market what it wants. This means tomorrow's cut is going to be 50BP. The market will have a small rally since the EV is 44.75 BP. I believe the FED should cut 25BP, but they wont. If they do cut 25BP the DOW will drop a couple hundred, Financials will drop about 10%, and the next few weeks will test the lows set last Monday/Tuesday.

No matter what we are moving tomorrow. For this reason I put several straddles on XLF since the financials will be moved the most by the cut. Today's consolidation allowed for the perfect opportunity to put these and limit my directional risk from an overnight rally and a pull back tomorrow. If we see the 25BP cut the market is going to move big. For this reason I also purchased a few puts on XLF. This give my expected payout a bit of a bearish wait, but as long as the market moves tomorrow...I make money....A bearish straddle if you want to name it...

Ill be trading some E-minis and Ultras tomorrow as well on the swings and maybe take a directional position with a tight stop going into the meeting if the opportunity presents itself.

On the currency side I went long the AUD/JPY. Im hoping to hold this position for a few weeks and get some good interest and hopefully a short continuation of the carry trade.

Let the markets move.

I need to cut back on the caffeine.

The market did stuff last week. I did some trading. It was okay. I may trade next week again. I might also start a circus. We'll see which one materializes. Oh yeah. Rock climbing is fun. The black cliffs in Boise are slippery though. That's the most intelligent sentence you will get out of me tonight. Goodnight all.

Consolidation

Consolidation was in fact the key of today. Mixed markets made it a dificult trading day. I attempted to throw a coupld small trades in and got stopped out on the volatility in all of them, but luckily they were all small. The price went straight down the funnel and broke out lower. We It then hit a support level around 99.60 and is currently testing this level. I would not be suprised to see this level fall as Asian markets open. After this the next support is around 98.000 as shown below.
My game plan is to watch to see what happens with this support and in Asia. S&P futures are up from the market close right now which is favorable for tomorrow. Im hoping for the pullback tonight to the 98.000 range and that S&P futures continue to trend up. If this is the case Ill go in pretty heavy and set a stop around the 95.500 level. I suspect the bull run should continue for the rest of the month once it gets going and I want on! Watch the spiders close! There is an upward sloping support trend forming. It was penetrated a bit in August but that was when there was the problem with computer routing on the orders that caused the dagger of a candle. There also could be a morphed head and shoulders forming as well. The highlighted area is of particular concern. If we are going to make another run at the market it better cross that resistance level of 156.00. Upon breaking that we should break 157.50 and have another good leg up into January. Failure to break 156.00 (perhaps a retracement upon reching 152.50) will definately push this into a bear market at the turn of the year.

BUY BUY BUY

AUD/JPY Long is kicking ass today...which is great after the frustrations of yesterday. Yesterday was in fact the bottom of the market but the volatility knocked me out and cost me about 100 pips of profit. Last night around 10:00pm PST I jumped back in on my 50:1 account and then followed about 15 minutes later with my 30:1 account. The 50:1 account is up 120% in under 24 hours and the 30:1 is up over 70%. I have doubled down on the positions upon confirmation of a strong Asian Market opening up tonight.



Tonight's chart shows the clear uptrend developing. The bottom was around 2pm yesterday and the trend took off. I have drawn in what I would consider the uptrend support line. There was a test of this line from 8am until 12pm today during the US market open. I consider this test to be nominal due to the increased volatility often observable during US market hours. A small support developed at 99.850 tonight around 5:30. That is the horizontal yellow line on the chart. I have my stops set at the vertical line with my small double position is taken out where this vertical line crosses the uptrend and my main position is set to be stopped out a bit lower than that to allow for a bit more volatility. Im trading the 50:1 and 30:1 similarily with a bit tighter stops on the 50:1 (this chart is the 30:1).


Several key economic numbers come out tomorrow which have me a bit concerned. S&P futures are currently trading flat after being a few points down earlier in the evening. I plan on setting tight stops tonight and securing today's profit. Im expecting a fair amount of consolidation in the next few days with 100 pip swings up and down throughout the day. Ill probably sit these out and hope the bull trend continues next week and try to double my money again.

Carry Trade Unwinding

The AUD/JPY carry trade has unwound heavily this week. We are currently trading at about 97.045 Yen per Austrailian Dollar. We touched off of a low of just above 96.000 around the US stock market open at 6:30am. This is due to a strong positive correlation of the Yen strength relative to the US dollar's strength since the Japanesse economy is heavily based upon exports to the US. The US stock market has been trading positive the last few hours and I have re-entered the carry trade. I placed my first postion at 8:00am at 96.257 with a S/L of 95.900. There appears to be a fair amount of resistance around the 96.000 level on the daily chart and I am allowing myself 10 pips of volatility around this resistance level. An initial attempt to average in another 350 units in had my stop hit as the stock market pulled back around 10:40am.

The below chart shows the relative correlation of SPY to the AUD/JPY pair. The USD/JPY shows this same correlation. 109.000 represents a solid support level of the Yen and fundamnetally it should hold at the level and begin to weaken again.
I am currently waiting for SPY to hit 146.00 to leg in another 350 units. I suspect that if the US markets close on positive gains then the Nikkei should have a solid day tonight and the Carry trade should hopefully get some upward momentum. Tight stops are the key right now.

Fixed Gear Crit

Well I do believe UI has accomplished a first...Perhaps we can hold the record as hosting the first collegiate fixed gear criterium ever...or at least one with a decent downhill into a hard right.

3 weeks!

3 weeks until the semester is over!

And here is what I have to do....

Presentation on population forecasting.
14-30 page paper on population forecasting.
6 tests
2 major assignments

Promoting a bicycle race this weekend

ummmm thats it I think.

I went mountain biking yesterday with Chris. It was great to get up on the mountain considering I havent been in like 9 months. It makes me want to start training for cross racing though. Cyclocross is the most addicting sport ever. It makes me almost want to sell my road bike to free up some cash for cross racing. Maybe I will train my ass off this summer so I can be really good at cross in the fall....its a thought.

Goodnight and maybe Ill post again in 6 weeks :D