11:25 am EDT:  With a bit of weakness so far, the ES has found support around the major market profile point of control at 1063.00 (low of 1062.25).  If we see new lows, we would not stick around in daytrade longs.

The FOMC Announcement is usually a few minutes late, so don’t confuse a spike in the illiquid moments around the release at 2:15 pm with an actual reaction to the Announcement.  The pattern for equities is usually for a three wave move–a spike in the initial direction (mostly up for the last two years), a quick reversal, and then a continuation of the initial direction into the 3:00 pm time frame, which is the likeliest time for another reversal, should it occur.  After 3:00 pm, if price continues in the original direction, it will likely continue into the close.  Otherwise, it will likely retrace most of day’s movement.

The Precise Take – Expected strength into FOMC day

Leaders Analysis: US Dollar weakness led the day yesterday, allowing gold and equities to gain.  We do not yet see gold as leading the charge because strength is not reflected in gold priced in other currencies, such as the Euro, Canadian Dollar and Australian Dollar. 

General Analysis: This week’s auctions have so far been well received, and the 7 Year is on the block today at 1:00 pm, not far from the FOMC Announcement at 2:15 pm.  If the markets behave according to their historical norm today, as they did nearly perfectly last month, we should see early strength in equities today followed by another surge on the announcement, with some long covering after 3:00 pm.  The Time Profile generator is on the fritz today, so below is the Time Profile for FOMC days reprinted from our August 12 2009 report.  We don’t expect it has changed materially.  Nor do we expect the FOMC to materially alter the language in the Announcement, preferring instead to dribble policy changes surreptitiously through interim press releases.

Trading Today: Given our bullish bias today, we’ll be looking to buy an early dip in the daily gap/pivot area of 1065.25 to 1067.25 or, on a dip to the highest volume market profile point of control for the ES Dec 09 contract at 1063.00.  If price trades below 1063.00, we will likely not trade until after the FOMC Announcement at 2:15 pm, taking the weakness as a sign…

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