Federal Open Market Committee (FOMC) & Bank of Japan (BOJ) Announcement will Impact Market!

Stocks opened in mixed fashion on a very busy news day and have seen modest selling pressure into midday Tuesday. The S&P 500 is down 5 points to 2163.48 and 10 points from session highs.

Treasury bonds are steady ahead of an FOMC policy update Wednesday and despite stronger-than-expected data on Consumer Confidence and New Home Sales Tuesday. The yield on the benchmark ten-year remains near 1.57%.

Crude oil lost 30 cents to three-month lows of $42.85. Gold is flat at $1320.

On Wall Street, Utilities (XLU), Telecomm (IYZ), and Consumer Staples (XLP) are the biggest losers. Basic Materials (XLB) and Industrials (XLI) are seeing modest strength.

CBOE Volatility Index (VIX) is up .36 to 13.23 and has gained 1.21 points since Friday. However, overall options volumes remain light for a second day. Roughly 3 million calls and 2.6 million puts traded through the first two hours. Projected volume for the day is 13.3 million and nearly 20% less than the one-month daily average.

SPDR 500 Trust (SPY) Jul 29th 217 calls, iShares Large Cap China Fund (FXI) Nov 25 puts, and XLP Aug 55 puts are the most actives.

Looking forward, the focus turns to the FOMC meeting Wednesday afternoon and then the Bank of Japan policy update Thursday.

A notable options trade late Monday was a buyer of 100,000 August 5th 12 calls on the iShares Japan Fund for 12 cents Monday. The whale of a trade comes after 50,000 Sep 2nd Weekly 12.5 calls on this ETF were opened Friday.

See Tradespoon’s Stock Forecast on iShares Japan ETF (EWJ)

Tradespoon’s Stock Forecast on iShares Japan ETF (EWJ)

The daily chart of the Japan Fund, above, shows the price action leading up to the BOJ announcement. Shares saw a notable spike earlier this month, but have been trading in a “wait and see” range since that time. The aggressive call buying Monday and Friday seems to be expressing the view that Japan’s equities (and EWJ) will rally in the near-term and those expectations are likely related to the Bank of Japan announcement Thursday.

Indeed, since much of the gains in global equities since the late June Brexit vote have been fueled by policy stimulus hopes, the Fed meeting and the BoJ announcement over the next two days certainly have some market moving potential. Good news might already be baked into the cake, with an uptick in volatility likely if officials color outside the lines in their post-meeting rhetoric.

But before that, investors will navigate another obstacle course of quarterly earnings reports. Las Vegas Sands (LVS), United Tech (UTX), and Texas Instruments (TXN) are among the names seeing notable gains in the wake of their reports today. McDonald’s (MCD), Verizon (VZ), and Gilead Sciences (GILD) are saddled with losses.

Widely-held Apple (AAPL) reports after the closing bell. The release will garner much attention since shares are widely owned and because of the implications for Apple’s various supply chain partners. Shares are down 34 cents and testing support at $97 Tuesday ahead of the report.

The S&P 500, meanwhile, is testing recent support around range lows of 2162. Beyond that, 2055 and 2050 are the next areas of support. Look for resistance at 2065, 2070 and 2075.