Wednesday at 2 pm EST the Federal Open Market Committee (FOMC) will release a statement regarding Interest Rates, Monetary Policy and their views in regards to the economy. Traders, investors and other interested parties will be watching closely to see how the market responds to the release. In the past few years, FOMC statements haven’t carried the same weight that they had historically. This event may be different though, as the FOMC is in a tough spot regarding quantitative easing, a market near all-time highs and public debate over whether they should continue their bond purchasing program at the aggressive levels they have the last 5-years.

Last statement (March 19th), the FED spoke regarding maximum employment and price stability – their stated mandate – and felt that the conditions in the market were stable and improving. In light of that, they decided to hold nearly steady on their short and long term purchasing programs confirming that they will continue to add them at $55B per month.  They use vague language in their statements – leaving room for any action they deem necessary. The insinuation is that if the labor market improves and inflation stays within their long term target range they will back their foot off the proverbial gas pedal.  We’ll see.  This general transition is referred to as tapering. You’ll hear that word frequently from the cable shows and blogs.

The entire process leaves the average investor scratching their head….wondering how this body became so powerful and cautious at the arrogance of it all. Whether the FOMC can keep this economic bus on the road or not is something that only time will tell. What is very important for each of you is to make sure you start to watch for these reports as they come out and be ready to respond by hedging or adding new trades based on the response from market participants. If the S&P 500 breaks out – you have to trade what you see. If it breaks down – be ready to make quick adjustments in your account. Either way, if you have the ability to do so, make sure you’re logged into your account and watch the intraday response to the news release.

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