The markets are very quiet today ahead of tomorrow 's extremely important FOMC announcement. This is one of the most important Fed meetings in recent months as markets will get a better feel of the Fed's view on the economy, what the fate of the Fed's balance sheet is; either a reinvestment of the proceeds of maturing securities, or if the Fed will allow the balance sheet to naturally shrink. The reaction to whatever the news is should be significant, as bond yields have been sharply diverging lower from the meandering stock market to the topside. If the Fed does not reassure the markets of additional liquidity measures or near zero interest rates for a prolonged period of time, bonds and stocks should sell off sharply spiking their corresponding yields and the US dollar higher. However, rather than try to foretell the outcome of the meeting, we will be prepared with price levels that can become actionable zones in reaction to the Fed announcement.
In the event the market takes the news in stride, I am still in favor of trading risk to the short side as there exists a massive S&P resistance level at the completion of a wave C Flat within larger wave II/b at 1145-1151. If however, the markets turns lower from current levels, the requisites for wave C Flat within larger wave II/b are now fulfilled.
Drew, a follower on Twitter, drew my attention to this AUDJPY 240 min chart. We look to be near completion of a 2nd wave pattern just above following the break from this current triangle. We all know triangle breaks always precede the final actionary wave, so any push into Fib resistance zone 80.00 could complete an A-B-C zig zag from the July 4th lows. Risk is very tight on this with a trade above 80.86, but the downside profit potential is large. I will be keeping an eye on this trade into tomorrow's announcement. On my hands for now exercising extreme discipline in this thin, summer, pre-Fed market
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