Morning Outlook – 4/28/2021

Nearly everything in life is a gamble, including trading. The wife always teases me – “are you gambling in there or playing computer games again?” “Anything to avoid a real job.” Well, since the last time I had a real job was April 1987, not much is likely to change.

But as with life, we assess risks and probabilities before forging ahead in trading. We weigh the pros and cons. Maybe I am delusional, but risk-taking is a matter of degree when you are weighing evidence and assessing probabilities.

Today, the Fed will conclude their latest meeting, and Chairman Powell will hold a press conference. Fed policy is somewhat elevated in my weightings at the moment due to inflation expectations. The Fed will announce today’s press release on monetary policy and interest rates about two hours before the close. No change in policy is anticipated, but every word of the press release and Chairman Powell’s back and forth with the press will be dissected.

To make a long story short, unless you are a pure gambler or you have a specific and targeted options strategy, it is unwise to day trade today in light of the looming announcement and press conference – unless you a purely gambling on the announcement. That holds true for any day when major economic reports or other events loom over the market. On Fed days, we typically see a low volume balancing market before the announcement and then some wild volatility after – depending on the content of the announcement.

Moreover, tonight President* Biden will speak to a joint session of Congress and announce various tax proposals. The proposals (which are just that – proposals) could have a big influence on the markets tomorrow. Keep in mind that, as with any negotiation, you typically start higher than where you truly believe your proposals will be accepted. There likely will be some of that tonight.

The Capital Gains tax proposal several sessions ago likely was a high volley to start negotiations. The market had a knee-jerk sell-off that created a buying opportunity. So my advice is don’t panic quite yet, as we see these two significant events pass in the next 24-hours. As well, my advice is to let these events pass before making any material investment decisions as we approach the end of the month on Friday. 

Good luck today, I won’t be advising or trading – as it would be pure gambling.

A.F. Thornton