All 3 U.S. stock indexes are pointing to a higher open as investors focus on the FOMC meeting and domestic issues facing U.S. economy. The question of the day is “what will the Fed do?”

Will the Fed start new round of easing commonly known as QE3 or will they restart Operation Twist to help provide liquidity in the U.S. markets.

Look for gold to react to the up side if the FOMC initiates a new round of easing with QE3 and what most analysts suggest a smaller move on a restart of Operation Twist.

The Fed as well as investors face continued signs that the economy is slowing in the face of the Euro Zone crisis with Greece, Spain and Italy on the verge of seizing. Will European policymakers actually finally get their arms around the issues?

Speaking of policy makers getting ahead of the issues the Fed is going to have to position and probably hold something back in their bag of tricks ahead of U.S. Fiscal Cliff coming in less than 6 months now.

Bottom Line: Markets are likely to drift slightly higher ahead of the FOMC on hope the Fed  will take action.  If the Fed fails and disappoint look out below.