First Inflation, Now the Fed

What a busy two-day stretch it is.

Technical Edge — 

• NYSE Breadth: 59% Upside Volume 

• Advance/Decline: 71% Advance 

• VIX: ~$22.75

What a nasty fade we had yesterday after a strong reaction to the better-than-expected inflation data.

As if destined to create a one-two punch, we now have the Fed’s FOMC decision today. Markets are pricing in a 50 bps increase, despite a slim chance for a 75 bps hike.

The Fed will almost surely go with 50 basis points. It’s what Chairman Powell has to say afterwards that will matter. Will the Fed remain aggressive and keep hiking in 2023? Either way, remember that the market loves to run the stop-loss orders on the upside and the downside during Fed days.

The Fed is making progress on inflation, but is it enough progress? If Powell thinks so, the market has the ability to rip. If not — thus more hikes — the S&P could be vulnerable. Here’s a look at the key levels + Tesla.

S&P 500 — ES

I’m now keeping an eye on the 4000 to 4017.50 area. I wouldn’t be surprised if we see the top of that range today — 4017.50, which is yesterday’s low.

They love running the stops on Fed days, but just below yesterday’s low, we also have the 10-day and 21-day moving averages, as well as the 61.8% retracement. Not to mention, breaking this range puts the ES back below 4000. 

It will all depend on if Powell takes a hawkish stance or a dovish stance in regards to future rate hikes. 

On the upside, 4110 is back in play, followed by 4150, then 4180. 

A break below 4000 that’s not reversed could ultimately put 3960 on the table. 

SPY