The best Fed taper scenario possible?
There's a big risk in the Federal Open Market Committee statement scheduled for Wednesday, M3 Capital President John Netto said on CNBC's "Fast Money."
"The biggest thing facing traders tomorrow is the possibility for misinterpretation," he said.
Netto noted that the Federal Reserve's economic statement and the summer economic projections were set for release at 2 p.m., and the FOMC statement was expected at 2:30 p.m.
"That simultaneous release about the size of the taper, and whether or not they're going to possibly lower the employment threshold, combined with their forecast of the Fed funds rate, unemployment and GDP are all going to play a factor in how the market reacts at 2 o'clock," he said.
"And I think the first reaction'll be that knee-jerk based on the size of the taper, but what's more important is how much the Fed emphasizes, at least how it pertains to equities, what they're going to do with the forward rate guidance."
Netto said that the biggest positive push for the market would come from the Fed announcing that it would continue unabated its $85 billion-per-month asset-purchase program — and it does not set an October meeting date.
That, he added, would be "a huge boon to the market because there's no way the Fed would initiate new policy without having a press conference to clarify and discern what those metrics were. So, that's the most bullish scenario possible.
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"That sends Treasuries rallying. That sends the dollar selling. That sends yen rallying. And it also sends equities rallying, and especially emerging markets and anything out the yield curve that the Fed has had people chase over the last 18 to 24 months."