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Global Macro: Traders Remain Neutral Ahead of Fed Decision

NEW YORK ( TheStreet) -- Equity, bond and commodity ETFs pared gains or losses from the previous day as investors are electing to hold off on speculating the Fed's decision. The most volatile asset was by far the iPath S&P 500 VIX ST Futures ETN (VXX).

At the start of Tuesday's trade the volatility index looked as if it was going to breakout to new highs. By the afternoon, however, prices had collapsed back into the range. This lack of commitment to the fear indicator allowed equities to bounce higher, having broadly sold off since early December.

Similarly, the iShares 20+ Year Treasury Bond (TLT) pared losses from the day before as investors chose to have neutral exposure to long dated bonds ahead of Wednesday's meeting. The rally in bonds caused interest rates to fall leaving rates unchanged from Monday's open. Lastly, SPDR Gold Shares (GLD) steadied after a sharp fall on Monday alongside a stronger U.S. dollar.

The lack of discernible change in major assets from Monday's opening prices indicates that investors are not attempting to front run the Fed decision. September's policy meeting was successful in confusing the market and trapping speculators on the opposite side of price movement.

Leading up to the meeting, it looked certain that the Fed would choose to tighten stimulus measures, having spoken about tapering since early May. When the committee announced that stimulus would be left unchanged, bidding went wild in gold, bonds, and equities, moving significantly higher in a matter of seconds. The decision was highly profitable for some, but most speculators felt a lot of pain being squeezed out of short positions.

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