It All Comes Down To One Moment In Time...

Tuesday at 2:15pm is that one moment. Fortunes will be made and fortunes will be lost on that very moment.

Over the past two months we have witnessed some of the most intense market speculation in a very long time. Speculation over the economy, global growth, employment, credit crisis, retail spending, commercial paper, oil, gold, the value of the dollar, and so on. The speculation has created heated debates of the like not seen in recent years. For every point made, there is a counter point which has merit. The debate continues, but the future remains an unknown.

While the general consensus on the street is that the FOMC is going to issue a 25 basis point rate cut, we remind you that it is only a consensus, not a fact. More importantly, has the market already priced in a 25 bp cut? Or, has it priced in an even stronger cut? There are valid arguments to be made in saying that if the market gets a 25 basis point cut it may rally for a short time and then sell off. And, if the market has been pricing in an even stronger cut and does not get it, then the markets will sell off even faster. One more argument out there is that the economy is the driving force of whether money moves into or out of the market, and with signs of economic weakness, neither a 25 or a 50 basis point cut will keep the market from selling. In some ways a rate cut may do more harm than good if the dollar weakens any further. Now what happens if the FOMC does not cut rates at all? All very interesting points to ponder. And why Lisa and I have arrived at the following recommendations.

We want any of our readers who took the short trade on ClearWire (CLWR) to close out that trade tomorrow. It is a good gain and we want to close it and lock in profits. We are recommending that NO new trades be taken going into the FOMC announcement. This will be placing a bet and RebelTraders do not place bets. That is for Vegas, so leave it in Vegas. Now, after the FOMC announcement, lies a very difficult call. Lisa and I have discussed this and we have arrived at the decision that we do not recommend buying or shorting any swing trades immediately after the announcement. The reason for this departure from my recommendation weeks ago is due to the movement of the markets and other developments which have occurred over the past couple of weeks . What we see happening after the FOMC announcement is a surge of emotions which will be followed by more rational movements of money. So to say that a rally that begins right at 2:16pm will last is not fair to say. For that rally will (if there is one) perhaps only last a short while as sellers are cashing out on the strength. (Important trading lesson here: The smart money movers and traders will sell on strength. It is strength that allows them to move large amounts of shares out on high buying volume. Otherwise they have trouble unloading the large amounts of shares). So if there is a rally it could be short lived. It may be a few hours or a few days.

Another reason we are not recommending 'jumping in' after the FOMC announcement is the other events which will take place this week that will be market moving events in their own right. On Tuesday, Lehman Brothers (LEH) reports earnings before market. On Wednesday, Morgan Stanley (MS) reports earnings before the market opens. And on Thursday, Goldman Sachs (GS) and Bear Stearns (BSC) report their earnings, again, before the market opens. With the substantial speculation over the impact of the credit situation, the mortgage market meltdown, the commercial paper (which for the most part still can't find substantial buyers), all eyes will be fixed the largest financial firms in the country, to gauge the impact to their bottom line. What they say could change the direction of the markets very quickly.

Now, if that was not enough, Fed Chairman Ben Bernanke is scheduled to testify before the House Financial Services Panel on Thursday, regarding the nations financial mess. So this is a week of LARGE market moving events. Taking on a swing trade at 2:16pm on Tuesday is no longer prudent. In one swift moment any trades (long or short) could gap in the other direction and create a substantial loss. So for these reasons we are going to sit on our cash and let the bulls and bears go at each others throats. It will be a wild week and one that will be for the history books I see.

If we were currently setup for our daytrading and live market member access service we would perhaps take a day trade on certain events, but as that is still being written in software for the RebelTrader member site, we have to stick with our swing trade recommendations.Let's stay out of the mess until this subsides. I would much rather sit on my cash instead of trying to guess which way the market is going to go each day this week with so many substantial events happening each day.

Don't feel like you may miss out on "the big one" or that you 'need' to be in there this week. We can assure you that there is much money (and safer risk) to be made even after the volatility this coming week subsides and we can grasp with more clarity what direction the market is going to go. We are at a crossroad here and the traffic light is burned out. We can't try to cross the street until the light is fixed.

Oh, and one other thing. the BBC has reported that the situation in the United Kingdom last Friday concerning the bank and mortgage company NorthernRock resulted in patrons of that bank to withdraw in one day 2 Billion Pounds (that's 4.011 Billion US dollars to you an me) in a run on the bank due to their announced financial crisis. Oh... remember American Home Mortgage? They were one of the first casualties of our mortgage disaster. Well it was reported today that some of their checks are bouncing. Yep, payments by American Home Mortgage to pay property tax bills are bouncing. This is not good...

See you in the morning Rebels..