Operation Twist 2: How to Trade Tomorrow's FOMC Meeting

All eyes and ears will be on Ben Bernanke tomorrow, and everyone will be listening and analyzing every single words, dissecting it a million different ways. The Federal Open Market Committee (FOMC) is holding its two-day meeting which starts today, and the decision will be released tomorrow at 12:30 p.m. At 2:15 p.m., Bernanke will hold his second press conference, as Bernanke tries to continue to be more open about FOMC policy, and have a direct dialogue with the average American, as opposed to just the financial markets. No one expects the FOMC to do anything to the federal funds rate, which is currently 0-0.25%, but the language is the key here. The $600 billion whale known as "QE2" is ending soon, and no one in their right mind expects the Fed to announce a "QE3" now. Not unless the markets took a plunge, and the economy slowed to a point where even the tortoise from the "Tortoise and the Hare" was beating it in a race. No, everyone will be paying attention to the language. For now, the Fed has the line "extended period of time" in regards to keeping interest rates low. Bill Gross, the head honcho at PIMCO, had an infamous tweet about QE3, and the potential for interest rate caps on U.S. Treasuries, or the extended period language, which is mentioned above. The process is being known as "Operation Twist 2", and some, including Gluskin-Sheff's David Rosenberg believe this to be true. Larry Meyer, the key leak from the Fed to the real world may be telling Gross what to expect from the Fed, which is why that tweet from Gross was so ominous. Meyer is the head of Macroeconomic Advisors, after having been at the Federal Reserve. Reports have confirmed that the housing market is already worse than the Great Depression, and it does not look like it is going to get better anytime soon. If we get any mention about an interest rate cap or the "extended period" language is drastically different, than we know that Ben and his crew are setting us up for QE3, and in that case, it's risk on. Since the Fed can not call it QE3, it will be described as something else, which is the reason for the interest rate cap language. It's QE3 without with the "QE" part. If traders see any mention of this, names like Caterpillar CAT, U.S. Steel X, Apple AAPL and other high beta names should see a boost. Leveraged ETFs such as Direxion Daily Finan. Bull 3X Shs ETF FAS, Direxion Daily Small Cp Bull 3X Shs ETF TNA are also good plays as well. We are all waiting on everything Ben and the bunch have to say. The fate of the economy depends on it.