Tomorrow is the last FOMC meeting of the year. It appears to be nothing more than a formality we'll get another 25 basis point hike in the discount rate. The market has already pretty much factored this in so I doubt we'll see anything earth shaking in the markets accompanying the announcement. HOWEVER ...

The meeting notes which will be released later in the session tomorrow have the potential to really produce some firewrorks. Many FED watchers are predicting a major shift in the wording of the "Policy Statement" that follows the meeting later in the day. More than any "Policy Statement" released in the last 2 years this one has the potential and the accompanying set up to really shake the trees. Most believe the FOMC will give us a signal tomorrow relating to the end of the current rate hikes ... totalling 13 since June 2004.

As if things weren't tense enough a very unfriendly report hit the streets earlier today as the Treasury reported that outlays exceeded reciepts by $83.1 billion, a much, much larger monthly deficit than the $61.0 billion analysts had predicted. That's about 30% higher, in fact. The higher deficit numbers mean that more debt securities will have to be issued by the treasury.

In short, the stage is set for possibly THEE most unsettling trading day of the year affecting stocks, interest rate issues like Bonds and Notes and, to probably a lesser but still significant level, currencies. Precious metals, especially Gold, as well. I may sound a bit like "Chicken Little" but, hey, you aren't going to retire off trading results from tomorrow any way, so why take the chance of tugging on Superman's cape. I'm recommending to all our subscribers ...

Be flat all sensitive positions by no later than 1:15 CST and, even more importantly, STAY flat the balance of the day. By any measure of applying risk/reward principles to tomorrow's scenario I believe you CANNOT make a case for trading in this circumstance. Let's be careful out there!