Morning Brief, Nov 8 – How to trade S&P500 on FOMC today?

Posted Thursday, November 8, 2018 by
Arslan Butt • 3 min read
  • Dollar trades in a narrow range as markets settled after US midterm election results came in line with forecasts.Federal Reserve watch indicates 81% probability of Fed raising rates to 2.25%-2.50% at December 18-19 policy meeting.Stock markets jump on Midterm elections, the results were priced in.How to trade US stock index SPX // S&P500 today?As you know, the Federal Reserve is due to release its interest rate decision which may drive massive fluctuations not only in the forex but also in the equity markets.

    So, are you ready to deal with it? Let me help you…
    SPX – S&P500 – Double Top Pattern & DojiLooking at the 2-hour chart, the US stock market index is consolidating below a solid double top pattern which is providing it a resistance near $2,815 along with a support near $2,772. Typically, the double top pattern reverses the bullish trend into bearish and, with no surprises, the SPX has closed a doji candle right below the double top.

    You know what it means? It’s showing a neutral sentiment of traders, perhaps, due to the Fed monetary policy decision.

    The thing is, investors are anxiously waiting for the FOMC statement and Fed fund rate which is coming out during the New York session. For us, it can be a nice trading opportunity. For instance, if the FOMC statement sounds hawkish and hints at further growth in the labor market or even if the statement shows a decreasing GDP growth or inflation rates, we may see some serious violaitlity in the SPX.

    FOMC & Fed Monetory Policy Decision – Forecast & ExpectationsAfter a strong October employment report in the US, beating economists forecast, adding 250K new jobs and increasing wages by 3.1% over the year, expectations are adding up to hawkish sentiments from the current FOMC.

    The Fed has increased rates three times this year as the US economy expanded and inflation began to pick up. It has indicated a rate hike in December, with two further hikes by mid-2019. The Fedwatch indicates 81% probability of Fed raising rates to 2.25%-2.50% at December 18-19 policy meeting. However, the Federal Reserve isn’t expected to make any changes in interest rate in its November meeting today.
    Potential Impact – Unchanged FOMC & FED Rate (Dovish Tone)Are you wondering why dovish statements drive bulls in the equity market? Well, the expansionary monetary policy is considered good for corporate entities, as they can get more money to expand their business at a lower cost (lower interest rates). The more they expand, the more the chances of profits increase and investors can expect to get higher dividends than before. I hope this makes sense now.
    What to Expect from SPX Today?

  • As you know, the Federal Reserve is due to release its interest rate decision which may drive massive fluctuations not only in the forex but also in the equity markets.

    So, are you ready to deal with it? Let me help you…
    SPX – S&P500 – Double Top Pattern & DojiLooking at the 2-hour chart, the US stock market index is consolidating below a solid double top pattern which is providing it a resistance near $2,815 along with a support near $2,772. Typically, the double top pattern reverses the bullish trend into bearish and, with no surprises, the SPX has closed a doji candle right below the double top.

    You know what it means? It’s showing a neutral sentiment of traders, perhaps, due to the Fed monetary policy decision.

    The thing is, investors are anxiously waiting for the FOMC statement and Fed fund rate which is coming out during the New York session. For us, it can be a nice trading opportunity. For instance, if the FOMC statement sounds hawkish and hints at further growth in the labor market or even if the statement shows a decreasing GDP growth or inflation rates, we may see some serious violaitlity in the SPX.

    FOMC & Fed Monetory Policy Decision – Forecast & ExpectationsAfter a strong October employment report in the US, beating economists forecast, adding 250K new jobs and increasing wages by 3.1% over the year, expectations are adding up to hawkish sentiments from the current FOMC.

    The Fed has increased rates three times this year as the US economy expanded and inflation began to pick up. It has indicated a rate hike in December, with two further hikes by mid-2019. The Fedwatch indicates 81% probability of Fed raising rates to 2.25%-2.50% at December 18-19 policy meeting. However, the Federal Reserve isn’t expected to make any changes in interest rate in its November meeting today.
    Potential Impact – Unchanged FOMC & FED Rate (Dovish Tone)Are you wondering why dovish statements drive bulls in the equity market? Well, the expansionary monetary policy is considered good for corporate entities, as they can get more money to expand their business at a lower cost (lower interest rates). The more they expand, the more the chances of profits increase and investors can expect to get higher dividends than before. I hope this makes sense now.
    What to Expect from SPX Today?

  • SPX can trade bearish below the double top resistance level of $2,820 to target $2,785 and $2,770. On the bright side, a bullish breakout is expected on a dovish FOMC which may lead SPX towards $2,835 and $2,850 but on the violation of $2,820 today.

    All the best & trade with care!

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    About the author

    Arslan Butt is our Index & Commodity Analyst
    Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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