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Trading Ahead Of The Fed

Despite a widely held expectation that interest rates will remain unchanged, the Fed could rock the market on Tuesday, what must you know?

Like the saying goes, it isn’t so much what you say, it’s how you say it.

That holds especially true on Tuesday when we get comments from the central bank.

Expect "the tone of the minutes to be micro analyzed" by investors, says Randy Bateman, chief investment officer at Huntington Asset Advisors.

The Fed has kept the language of its statements essentially unchanged for months. For example, the Fed has said over and over that:

*Inflation is likely to be "subdued for some time;"
* Economic conditions "are likely to warrant exceptionally low levels of federal funds rate for an extended period;"
* Economic activity has "picked up" or strengthened.

Analysts say the repetitive language is not an accident.

Investors will be looking to see if the comments stay the same. If not, it could signal a rate hike is coming sooner rather than later and the market will move accordingly.


However, a change in language may be a bit premature. “I expect the statement to be similar to what we’ve heard before”, muses Deutsche economist Joe LaVorgna. “If employment is strong then they take away the language in April but not yet.”

But it's not only about comments.

Investors will also be looking at the voting results when Fed governors decide what action to take about rates.

During the central bank's most recent meeting, in January, Kansas City Federal Reserve President Thomas Hoenig dissented from the committee's decision to keep rates stable. He said the economy has recovered enough that low rates for "an extended period" are no longer necessary.

If additional voters agree with Hoenig, that could be a sign the Fed will increase rates sooner rather than later – and again market could move.

Even the slightest hint that rates are going up could prompt investors to sell.

Or you could just play the history angle. 76% of the time when the Fed has a meeting the stock market goes up, says veteran trader Gary Kaminsky explains. I can’t tell you why but it does.


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Trader disclosure: On March 15, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm And Finerman Own (GOOG); Finerman's Firm And Finerman Own (JPM); Finemran's Firm Owns (WFC) Preferred; Finerman's Firm Owns (BSX), (OSIP), (TGT), (WMT); Finerman's Firm Owns (KFT); Kelly Owns (AMZN) Calls; Kelly Owns (ELX) Calls; Seymour Owns (BX), (EEM), (FXI), (MSFT), (XOM), (AAPL), (BAC), (GE), (F); Jon Najarian Owns (FCX), Is Short (FCX) Calls; Jon Najarian Owns (MSFT), Is Short (MSFT) Calls; Jon Najarian Owns (TGT), Is Short (TGT) Calls; Jon Najarian Owns (WMT), Is Short (WMT) Calls; Jon Najarian Is Short (GOOG) Through Put Spreads; Jon Najarian Owns (GS), Is Short (GS) Calls; Jon Najarian Owns (C), Is Short (C) Calls; Karabell Owns (FCX), (NKE), (GOOG), (FXI), (C); Nations Owns (MSFT), (SPY)

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