Traders locked in a few profits today as tomorrow brings the highly anticipated Fed announcement. Expect to see price action fluctuate for a brief period following the opening bell and then settle into a tight trading range as the market moves closer to the fed release.
Once the FOMC statement is released expect to see a whipsaw effect occur. Many novice traders get caught in the wild price action that follows a release quickly realizing that “sitting on hands” was a much better approach. The risk/reward is just too high for me in this type of situation. With the plethora of high probability set-ups that will present themselves over time why would I risk my money on a straight gamble. I prefer to wait until the market has worked through the kinks and then I might risk my capital if a good opportunity presents itself.
Remember, “sitting on hands”, like long or short, is a position. Realize this and take advantage of all it has to offer.
Overbought/Oversold for October 30, 2007
S&P (SPY) - 51.2 (neutral)
Russell 2000 (IWM) - 46.2 (neutral)
Dow (DIA) - 51.2 (neutral)
Nasdaq 100 (QQQQ) - 63.5 (neutral)
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Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com