Cautious Market Conditions

Hey 5-Star Trader,

Last month the Federal Open Market Committee (FOMC) held one of their scheduled meetings and yesterday their minutes were finally released. In a typical fashion, such news always has an implication on the market. So what do we do now?

Typically, directly after their meeting, I expect the market to experience back-and-forth action depending on the news that surfaced. But this isn’t normally a long-term effect. After the initial panic wears off, I look for the market “returning to the scene of the crime” by hovering right around where it was prior to the minutes being released. 

This time could be different… 

Prior to the FOMC minutes being released, the market was sitting at all-time highs and the indexes were looking pretty extended. The “run into earnings” sprint came early as FAANG stocks — Facebook, Amazon, Apple, Netflix, and Alphabet (formerly known as Google) ㅡ were all rallying upward as well. 

While these market conditions may seem good on the surface, I’m seeing signs that we might be topping out and ready for a pullback and the FOMC chaos could be the catalyst to set it off. 

My plan going forward… 

I’m still holding my positions for now, but I would caution every trader to watch their trades extremely carefully over the next few days. If there is a pullback, I expect it to worsen because everyone will be trying to get out of the market at the same time.

Stay safe traders!

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