FOMC Trading Strategy | SchoolOfTrade Newsletter 01/31/17

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“You must take personal responsibility. You cannot change the circumstances, the seasons, or the wind, but you can change yourself. That is something you have control of.”

Crude Oil is bearish after a strong move down off the highs, telling us that sellers will likely try to sell the next test of the moving-average, but a rising support trend-line appears to be getting in the way, which may develop into a triangle ahead of tomorrow’s inventory report. 

E-Mini S&P is bullish after a strong move higher to finish today’s session and buyers will be watching closely to see if this recent move develops into spike & channel or a ‘hidden channel’ tomorrow. 

Gold is bullish, but with an “overshoot” at the high of the channel, combined with a falling resistance trend-line coming down overhead, we expect that buyers will be patient to wait for the “overshoot” of the opposite side of the channel where they will have more incentive to ‘buy low’ tomorrow. 

Euro is bullish and trading sideways at the ‘Double-Up’ target this evening, which tells us to avoid buying into the highs, and look for more reliable buying opportunities at the low of the range tomorrow.  

FDAX is bearish and coming off a test of the triple-down at the low of a channel, which tells the sellers to beware ‘selling low’ and focus on selling up at the high of the channel near the ‘battle zone’. 

Crude Oil

Crude Oil is bearish after a strong move down off the highs, telling us that sellers will likely try to sell the next test of the moving-average, but a rising support trend-line appears to be getting in the way, which may develop into a triangle ahead of tomorrow’s inventory report.  Whenever we see a strong move in one direction like this, we give the bears control, and we assume they will be looking for another leg lower.  The bears will need to either correct higher up to resistance overhead, or get below this trend-line with strength for the re-test of the lows tomorrow.  The bulls on the other hand, even though we pulled back into the correction zone of the spike & channel, do NOT have control, so it will take a strong move higher before we can confidently start buying tomorrow.

E-Mini S&P

E-Mini S&P is bullish after a strong move higher to finish today’s session and buyers will be watching closely to see if this recent move develops into spike & channel or a hidden channel tomorrow.  One thing is for sure, the bulls have control and they most likely won’t keep ‘buying high’ much longer, which tells us the most reliable buying opportunities will come at levels of support such as previous swings and the low of the channel.  We also want to remember that FOMC Announcements often create range-bound markets, so we will also keep an eye out for a range, and the goal will be to buy low, sell high, and avoid the middle.

Gold

Gold is bullish, but with an “overshoot” at the high of the channel, combined with a falling resistance trend-line coming down overhead, we expect that buyers will be patient to wait for the “overshoot” of the opposite side of the channel where they will have more incentive to ‘buy low’ tomorrow.  The resistance trend-line is really the biggest threat for the bulls right now, as well as the biggest opportunity for the bears.  If the buyers can’t get back above the trend-line, or hold a deep pullback off the highs, the sellers will have an opportunity to take control and make a run back to $1200 tomorrow.  We also want to remember that Gold is highly affected by the FOMC announcement tomorrow and may go sideways, in that case, the market is still bullish and we will keep looking for ways to buy the low of a possible range.

Euro

Euro is bullish and trading sideways at the ‘Double-Up’ target this evening, which tells us to avoid buying into the highs, and look for more reliable buying opportunities at the low of the range or after we see proof that the buyers are interested in pushing to new highs tomorrow.  We also have a multi-tiered bull channel on the chart, which will act as support if price corrects back into the ‘battle zone’ tomorrow, so buyers have plenty of options if we get the pullback.  We also know that tomorrow’s FOMC Announcement will dramatically affect the Euro, so we will monitor the market personality closely tomorrow.

FDAX

FDAX is bearish and coming off a test of the triple-down at the low of a channel, which tells the sellers to beware ‘selling low’ and focus on selling up at the high of the channel near the ‘battle zone’.  Today’s move lower was very strong, so if this market keeps pushing lower, the goal will likely be a re-test of the prior week low, and the plan will be to look for traps and failures at short-term swings rather than chasing the move lower.