The indices are set to open lower this morning as market players became more uncertain about what President Trump will do about tariffs on China trade. Increases will go into effect on December 15th but there is a good chance they could be delayed if there is progress on trade.
Apple (AAPL) , which will likely suffer if tariff increases are not postponed, led to the downside yesterday and is indicated down over $2 early this morning. The stock has run up about $45 since early October and it is likely that some holders believe it is better to protect those gains rather than roll the dice on what will happen on tariffs.
The market's attention will start to shift today as we await the Federal Open Market Committee's interest rate decision and policy statement at 2 pm ET on Wednesday. Chairman Powell will also be holding a press conference. While it is a near certainty that the Fed will not change rates, the market will be looking for any hints about the level of dovishness.
Recently it has been a nearly ideal situation for the market with better than expected economic growth, few signs of inflation and a Fed that has a dovish tilt and will not likely raise rates for many months. If there is one simplistic adage that has worked well for many years it is 'don't fight the Fed.'
However, it's likely to be only a temporary distraction as we await news on tariffs. Since there is such intent focus on this event there will be some huge computer algorithms programmed to react to the headlines the second they hit. The market will make a strong move on the news no matter what it will be.
The big question for traders to ponder is how to position in front of this event. Some traders will try to guess and place their bets which is very risky. Other traders, like me, will wait for the news to hit and then trade the reaction. It is highly likely that there will some big swings after the news and there will be plenty of opportunities to trade the volatility with reduced risk.
In the meanwhile, I'll be looking for some stocks to trade that are moving more on their individual merits than on the overall market. The best trades right now have no correlation with the overall market action. Apple right now is a reflection of the mood of the overall market and is not tradable on its individual merits.
The good news is that this waiting game is going to resolve itself by this weekend when the tariff decision is made. It should offer us some great opportunities for trading as it plays out. My game plan will be to identify individual stocks that I want to trade that are moving based on the headlines rather than their individual merits.
Waiting is not much fun but the reaction to the news is going to offer some great opportunities.