Tomorrow is a very big day. The day the market has been waiting for all of 2015. The best thing we can do as traders is to keep a very open mind.
As an experienced trader, I suggest to you, Tune out all noise and watch and listen to what the market tells us, not what the fear mongers are saying, not what the media is saying etc. Most of them are out there trying to make money off headlines. We make money by trading, so trade!
There is a very high probablity of a rate hike, but who cares. The only thing that will matter at the end of the day is how the market reacts. I don’t know and nobody knows what will actually happen so we don’t sit here and make egotistical statements and gamble on a direction. The price will tell us, just like it did yesterday when we had a fair level of confidence that we would get to 2043 in the near future, and that took all of about 15 minutes of trading today. By aligning ourselves with these kind of risk reward plays, we make a shit ton of money (Excuse my French) without acting like we know it all.
Today is a good day in my opinion to grasp the overall picture so we can plan for what we will do going forward.
Let’s start with Sentiment: It appears to be in a neutral zone at the moment, so it doesn’t appear that it is too one sideded bullish or bearish, so not much of a contrarian trade here.
Let’s also note that although we have not had a 20% decline in a very long time, it clearly can go on longer.
Here is a chart of the SP-500 Week ending December 9th 2011. You know the outcome, as we are at 2043 today.
Here is a chart week ending today 12/15/2015: Identical eh? The only difference is the Fed was refilling the punch bowl with QE3, vs taking it away with a rate hike. But since the market already knows about the hike is it possible we get the same outcome?
Here we are on a monthly basis as well. We still don’t have a 10/20 cross, just like 2011
From a daily perspective, we know that breadth has been poor, but let’s give price action the benefit of the doubt here. Possible inverse H&S. Now if bears can get a push through the 61.8 retarace at 1965, then the H&S top becomes a bigger play.
THE BOTTOM LINE: We as traders are not paid to predict. We are paid to trade price action.