Fed rates and the spending bill are the issues today for the stock market! How will the market react?

The Stock Market is off about 1/4 % an hour before the open. Not much to note as most quotes are hovering around the 0 line with none outside the stock market range.

The thing to note is that today is Fed day. The Fed is expected to hike rakes 1/4 pt today and most likely telegraph at least 2 more rate hikes this year if not 4.

I have said time and again it is remarkable how the Fed is in aggressive tightening mode despite the political turmoil in D.C. The current risks are quite substantial. You would think the Fed heads would be more moderate in their approach. But, time will tell how their approach pans out. My guess is they have increased the odds of a severe recession, especially if things do not go as they project.

The other thing to keep in mind is the spending bill. It’s a real joke if you have read it over. A great example of how D.C. is completely out of control. Rather than cutting back on spending our representatives are spending on steroids. If the forecasts of economic growth fall short of the 3 to 4% the U.S. will be in big trouble. Especially if short-term rates continue to rise.

I wonder if the Fed has considered that by raising short-term rates they are creating a potential catastrophe for the U.S. as the debt has the potential to become unsustainable. The end result will be, tax increases, regulation, and back to 2% growth with the debt bigger than and bigger.  I doubt it will end well.

My guess is the U.S. has a few more years before they have to pay the piper. Without fiscal responsibility, national security suffers. The entire system needs to be looked at and revamped starting with special interests both at home and abroad. Our politicians are not able to be trusted to put the welfare of the country over the welfare of the special interests.

So far there has been little oversight because almost all of them have had their hands in the till. Its going to take someone outside of D.C.to come in and clean this mess up. And as I see it, it needs to be done very soon. Wishful thinking:)

Jim Rogers, the legendary investor has said it appropriately. The next financial crisis in the U.S. will be one that makes the last housing crisis seem like nothing. Reading his analysis it seems he is more likely right than wrong.

The idea is to start getting defensive a bit at some point. Sure we have all benefited from this bull market. And generally what happens is that people that think this will not end get crushed when things turn. I have seen bear markets and they are devastating for those that do not adjust.

A good way to limit your downside without affecting your upside much is to be out of the market when it is trading below the 200 day SMA. That’s a pretty good bellwether. If you’re a systems trader and use the 200 day moving average you find that most of the time long systems do much better when the equity is above the 200 day SMA.

This is a simple method and will save you some sleepless nights. I might suggest that this is something to consider.

I started a trade in AMTX and than added the 2nd half of the trade before the close. My 2 entries are 2.02  and 1.92. The stock closed at 2.10 and if I had been around before the close I most likely would have existed then. But this morning the stock is trading at 2.10 bid and 2.11 asked.

I plan on exiting shortly after the open if I can get 2.10. I also plan on trading it again if we get back down to the 2.00 level.

It’s rare to find a 2.00 stock that trades in 10 to 20 % ranges every day. Let’s see how long we can keep this going:)

Still early for mean reversion trading but one more downswing and I will be interested. I expect we get that with the spending bill staring at the Friday deadline.

If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. Typically I talk about the overall day expected with the markets and also give some levels on the ES and NQ for failed breakout scalping.

It’s my private twitter feed for the stock market and its free. Sports Handicapping is the subscription-based part of this site. But considering the cost of joining it’s almost free:)

Good Luck Today


RickJ’s Handicapping Picks


Skype: riccja

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