Today the Federal Open Market Committee wraps up its latest monetary policy meeting.
Traders are desperately searching for an answer to this question: Will the FOMC alter their interest rate language if they terminate their bond buying program?
Will they keep words that keep interest rates low for a “considerable time”?
Every FOMC meeting comes down to these potential tweaks. The changes are subtle, and they seem innocuous. But, if I may speculate, the impact too often damages your trading account …
Surprise: The Federal Reserve doesn’t care if their comments cause you to lose money.
They want the consensus to stay tied up, confused and guessing about the future for interest rates, markets and the economy. This buys them time while they themselves guess about the impact of market forces.
It’s the same tired game. So forgive me for being indifferent.
Besides, indifference is the best way to insulate your trading account (and profit too) from FOMC word games and the market forces that confound them.
Forget About Federal Reserve Futility
Yesterday, the US durable goods report missed by a lot.
The US dollar took a hit.
Because if the US economy isn’t on solid footing, the consensus thinks Janet Yellen and the FOMC will lean dovish and keep from hiking interest rates for a “considerable time.”
Long live the liquidity champions.
The reality, of course, is that no one knows what the Fed is going to say or do with its monetary policy statement today … or when they will or won’t be hiking rates in the future.
The consensus can only guess. And hope the market won’t inflict too much pain on them if they guess wrong (which is likely). It’s an exercise in futility.
This is why I don’t trade the FOMC announcement. Rather, I trade the traders trading around the announcement.
What does that mean?
It means I don’t care what the Fed does. I only care what price action does.
Price action represents the shifting emotions of traders. I essentially profit by harnessing those emotions.