Written by A.J. Brown

Heads Up: Today’s Events Have Rendered Our Technical Analysis Conclusions Moot

YellowLight.jpgHeads Up:  After two days of massive sell offs in the Asian and European markets, the U.S. Federal Open Market Committee took reactionary measures and dropped the federal funds rate by 75 basis points to 3.5%.

"The committee took this action in view of a weakening economic outlook and increasing downside risks to growth," the FOMC said in a statement.  It was the first inter-meeting cut since the 9/11 attack on the U.S..

The U.S. central bank is scheduled to meet Jan. 29 and 30. At this time, futures are still factoring another 25 to 50 rate drop.

How will investors react to the drops in the world markets?  And, how will they react to the FOMC measure.  It could go either way. 

What is known is that these events are having a "Stochastic Shock" effect on the markets.  That means our traditional technical analysis is rendered useless.  Any entry and exit signals are moot till the market digests these events.

I personally am watching carefully.  Amateur hour just ended and the swings have been extreme.  I’m trading reactively if at all.  And, if in doubt, I have no problem sitting on my hands with respect to my real money and instead opening up my paper trading and/or simulator accounts, and seeing the effect of my various strategies in these "off the wall" scenarios.

Best regards always,

A.J. Brown

Categories: News / Strategies

2 Responses to “Heads Up: Today’s Events Have Rendered Our Technical Analysis Conclusions Moot”

  1. Armando Tavian @ 11:43 am:

    With the little knowledge I have regarding options would it be possible to learn to trade in a complex system such as this without incurring a greater risk?
    I have 4 investing accounts and at this point I would like to improve the gains I have.
    Would I be able to know if I can learn to trade options in such a short time?
    Please, advice.
    Best regards. . . . .Armando Tavian - atavian@aol.com

  2. A.J. Brown @ 2:59 pm:

    Hi Armando,

    I’m not sure how I gave you the impression that my option trading system is complex. It is not. The more complex a system becomes, the more room there is for error. I like to keep things as simple as possible.

    Option trading has the potential to improve your gains, but there’s no guarantee that will actually happen.

    How quickly you learn how to trade options is up to you. You can learn a lot of the basics by reading some of my recent posts on this blog.

    Hope this helps!

    A.J. Brown


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