As we count down the hours to the 2 p.m. FOMC meeting announcement, I, for one, hope they remove the word "patient" from their official statement so we can move on to something more interesting. The bottom line is there's very little day timeframe participants can do to prepare for what the Fed may, or may not say in Wednesday's statement. We simply need to see how participants (and the machines) react once we know whether they've removed that one pivotal word.
In reviewing Tuesday's auction, we see that the E-Mini S&P 500 futures (Es) contract remained completely inside Monday's regular session range. So while value was overlapping to the downside, the fact that value was higher and price remained inside the prior session's range tells us the overall opinion (of value) was unchanged.
Given Tuesday's inside session and relatively flat value migration, our trade plan for Wednesday is largely unchanged. I'll want to begin the session with a focus on 2077 and 2060.75. As long as value remains above 2060.75, I expect buyers to remain active on intraday dips. Upside targets remain 2070 and 2077. Following the 2 p.m. FOMC announcement, any value migration above 2077 would be expected to trigger continued bullish price extension toward 2083.50 and 2092.25.
The bears don't begin to seize control until value slips back beneath 2060.75. From there, we can reset our sights on 2053 and 2042.
1. We first identified Alcoa's (AA) bearish breakdown in the Feb. 26 Trader Daily. Since that time, the company agreed to buy RTI International (RTI) for a healthy premium, but the stock price continued to sag. With the stock trading down to roughly $13 ( support dating back to April and May 2014) on Tuesday, and the Relative Strength Index (RSI) registering a sub-30 reading, now would be an opportune time for anyone short the stock to tighten up their trailing stop. An exceptionally liberal stop would be a session close above roughly $14.15.
2. Crude oil can't catch a break. After closing a bump over $43 (on the April contract) during the regular session, the American Petroleum Institute (API) released its weekly inventory report and prices quickly dropped another roughly sixty cents to $42.50. Traders were expecting the report to show an increase of around four million barrels, but the figure came in at 10.5 million. The U.S. Energy Information Administration (EIA) releases its figures at 10:30 a.m, so here's hoping they show a far smaller build. In any event, there's nothing about the chart of crude to be bullish about. This remains a market long biased traders should avoid.
3. While we're on the topic of oil, I received a request for an opinion on Pioneer Natural Resources (PXD). I know this is a popular name among fundamentally focused investors positioned for growth in the oil and gas industry, but I really don't see much to like on the chart. Price has been beneath a declining 150-day and 200-day exponential moving average (EMA) since late-September 2014, and the RSI is neutral at best. In fact, I'd rather sell the stock (short) beneath $150 than buy it anywhere near its current price of $156.50.
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