Trading Day 10/23/06

Wow, did you catch the USD rally at the London open !!??!!

My interpretation is that traders are nervous in anticipation of Wednesday's FOMC announcement. Given that core CPI is higher than the FED is comfortable with, it's just possible that the FED will be increasing rates one more time.

So ... the real question at 8:30 this morning is ... will US traders agree?

If so, then any movement is already over and you might as well take the day off!

My plan for the day is to organize my desk and watch events unfold. If I see any serious move, I'll consider a response at that time ... otherwise, my plan is to watch this game from the sidelines.

Meanwhile ... don't you wonder what the US equity markets would do if the FED raises rates? That uncertainty ... on top of the upcoming mid-term elections is enough to make any investor sweat!

Finally, I read that strong September and October equity markets during mid-term election cylcles are ALWAYS followed by a 5-10% correction in mid-November. Will the 'rule' hold this time around? You do have to wonder ....

Finally, finally, Barron's predicts the Republicans will hold both the Senate and House while the Iowa Electronic Markets predicts the Republicans will hold the Senate but lose the House. Since the IEM is the only US 'betting exchange' that, legally, can take bets with real money, you have to give it a certain degree of credibility. Notably, the IEM shows that the odds that the Republicans will hold both houses have dropped from 58% at the end of September to only 30% as of October 20th.

Opps ... US traders taking USD higher !!!