I have it on good authority that none of you won the $825 million Powerball lottery jackpot on Saturday (though you'll have a shot at a $1 billion jackpot this evening), so let's prepare for another week in the trenches.
Ordinarily, this week would be all about earnings and Friday's employment report. But let's face it, earnings and the employment report will take a backseat to Wednesday's Federal Open Market Committee decision.
According to the CME FedWatch Tool, the market is pricing an 80% probability of a 75-basis-point rate hike on Nov. 2. Since we're all expecting a 75-basis-point hike, it's safe to say that the actual headline event is the Fed's news conference. And as Nick Timiraos of The Wall Street Journal noted more than a week ago, the Fed is expected to spend part of its time during its meeting this week debating whether and how to signal plans to approve a smaller hike next month.
Last night, the FedWatch tool showed roughly even odds of a 50-basis-point hike versus a 75-basis-point hike at the Dec. 14 meeting.
Regarding coming earnings reports, we have Uber Technologies (UBER) reporting third-quarter results before Tuesday's opening. It's worth noting that Uber gained nearly 19% after reporting its second-quarter results on Aug. 2. The stock has held up better than the Nasdaq over the past few months, and a push over $30 (after its results) would warrant attention by swing traders.
The most dangerous trade heading into Wednesday's Fed decision is probably to be long, assuming the indexes remain strong and continue to trend higher. Traders have bet on dovish language ahead of Fed events earlier this year, and each time the Fed has left investors in a trail of tears. If you're trading the Invesco QQQ Trust (QQQ) , my primary upside is about $286.50, representing the 50-day simple moving average (SMA) and volume-weighted average price (VWAP) anchored to the mid-August swing high. On the downside, I'll continue to follow the VWAP anchored to the Oct. 13 low, and that point is currently around $272.25.
Unless you're using cheap upside calls (or some other options strategy) to place a well-defined bet on what Fed Chairman Jerome Powell will say at the Fed's news conference, the conservative trader should probably watch Wednesday afternoon's price action from the cheap seats.
