Now that the Syria situation has been moved to the back burner, market participants are refocusing on the same old question: What will the Fed do?
This question is more pressing than it's been in a long time. The Federal Open Market Committee will make its next policy statement next Wednesday. And many expect that when it does, the Federal Reserve will announce a reducing, or "tapering," of its quantitative easing program.
(Read more: Retail investors shrug off fears of Syria, Fed taper)
So will the Fed taper? In my view, yes, a taper is coming—and the better question to ask ourselves is, what will the taper look like? Will it be a $20 billion to $25 billion reduction, or will the Fed take a more cautious route, and only taper down $10 billion or $15 billion?
I believe that the Fed will taper somewhere between $10 billion and $15 billion, and I also believe that this number will mostly be factored in to asset prices already.
Why do I think that the taper be smaller? Well, I don't believe the economy as it stands now is strong enough to support a larger reduction in easing.
Sure, the economic numbers coming out of China have been good. But the numbers coming from the U.S. are mixed at best. Just 169,000 jobs were created in August, according to Friday's nonfarm payrolls report. That's a very weak number.
I believe the Fed will want to calm any fears that it won't be engaged in the market, and ensure investors that it will still add to the easing program if needed. For that reason, a taper of $10 billion to $15 billion makes sense. It shows that the Fed still remains engaged, while at the same time, it begins to wind down a program that is providing diminishing returns.
(Read more: Yields can't go any higher (yet): BofA technician)
Because I think that the market is already pricing in a small taper, I am looking to buy the S&P e-mini off of any knee-jerk selloff that occurs after the Fed announces a $10 billion to $15 billion taper. The market is supported at 1,665, and I will look to go long there, with a target of 1,700.
You can tell by the market action over the past few days that there is very little fear about what the Fed will do. In other words, if investors thought the taper would be huge, they would be taking profits now. And on the other side, if, for some reason, the Fed does not announce a taper, then I think we will see 1,720 in the e-mini very soon.