Get ready for more volatility this week as the two-day Federal Open Market Committee (FOMC) meeting kicks off today (Tuesday) and investors wait for a sign of more quantitative easing, or QE3.
The Federal Reserve announces what will happen with interest rates eight times a year at FOMC meetings. FOMC meetings are scheduled well in advance and receive a great deal of attention from the media and markets, but it wasn't always this way. It was not until 1994 that the Federal Reserve started publicizing the actions of the FOMC.
Now the FOMC announcements have become trading opportunities.
In fact, under Federal Reserve Chairman Ben Bernanke, the Federal Reserve has become the most influential market maker in history.
Bob McTeer, the former president of the Dallas Federal Reserve, wrote in Forbes that investors are so glued to Fed actions they even react when minutes are released from an FOMC meeting - even when the meeting's outcome was already known.
"It used to be "buy on the rumor, sell on the news' or vice versa. Now it seems to be "sell on the news and sell again on the same news in slightly greater detail,'" wrote McTeer.