Both the Dow and S&P 500 traded higher on Wednesday after upbeat economic data and a dip in the U.S. dollar lifted stocks broadly.
Now the Fast Money traders, as well as the rest of Wall Street, are eagerly awaiting the Fed Statement due Wednesday afternoon; everyone will be listening closely for hints of rate increases being needed sooner than expected.
The market is particularly jittery about inflation, especially after government data showed U.S. producer prices jumped a surprising 1.8 percent, and industrial output rose firmly.
What must you know to trade in the wake of the Fed decision?
Strategy Session with the Fast Money traders
The market likes to buy the rumor and sell the news, explains Steve Grasso of Stuart Frankel. Expect the market to rally into the meeting and then sell-off immediately following.
And according to Baryini, says host Melissa Lee, on average since the last 7 Fed decision days, ahead of the decision the S&P is up 73% of the time gaining 1.4% on the session, however after the decision is announced the market is down 60% of the time. That means make your bullish moves before the statement is read.
I’m longTBT and long the dollar coming into the decision, says Brian Kelly of Kanundrum. I don’t think they’re going to increase quantitative easing or increase their balance sheet. That means a reduction of money supply and as a result interest rates should go higher in the long-term.
Outside the Fed decision -- if you're looking for a trade, look at the banks, counsels Danielle Hughes of Divine Capital, especially those that pay a nice dividend yield. I expect to see a nice bump in those banks into next year.
I’m moderately bearish on the broad market through the end of the year, reveals Jared Levy of Peak6. I think the smart way to play it is to sell covered calls on the broad market indexes for all the stocks that you own.