It's Fed Day! | Trading the Indices and Looking at Growth Stocks

There is a 92% probability that the Fed keeps rates unchanged

There’s a huge push-pull going on here. On the one hand, we had that powerful rally last week, followed by some healthy consolidation as the technicals favored the longs. However, we also knew that a “less is more” approach this week would be critical, given the events on the table. 

In other words, we want to be long but the action is making it difficult. 

Today we get the Fed, with the odds favoring no hike. If the Fed were to deviate from that plan, it would create some obvious havoc. As mentioned previously, we also have quad-witch expiration in a few days. 

Once we clear that though, could we have smooth sailing for the end-of-the-year trade?

That is my (and other traders’) hope!

The Game Plan

“We’re not going to go crazy here. Why do something stupid and get chopped up in this pre-holiday mess until we have some clarity?”

That was yesterday and we are sticking to our guns — especially ahead of the Fed. Luckily, we aren’t a trading service or alert service. We don’t have to trade each day or force ourselves into poor setups. 

It is perfectly fine to ride the bench for a few days and wait for more clarity and better setups. That’s exactly what we’re doing now. Why ruin a potentially good couple weeks by forcing our trades on a couple of bad days. 

It’s no surprise that we can have 10 good trades and they get completely wiped out by 2 or 3 bad ones. This is the same thing. 

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Technical Breakdown 

• NYSE Breadth: 63% downside volume

• NASDAQ Breadth: 67.6% downside volume

Remember this: As for yesterday, I will only note that around noon, breadth was surprisingly strong as the S&P and Nasdaq were at their lows. The VIX was only at $22-and-change too. That can be a good time to look for long setups, when the internals aren’t adding up to the current headline results. 

In this case, the internals were much better than the decline suggested.

S&P 500

SPX Daily | Click to Enlarge

The S&P officially filled the gap at ~4612, but is below the 10-day and 21-day moving averages. If the SPX can reclaim these marks, 4673+ is in play. 

Below Tuesday’s low and the 50-day is on deck. With the Fed due up, I wouldn’t be surprised if this measure is tested at some point today, either ahead of the announcement or after the 2pm headlines start flying. 

Nasdaq, Dow & Russell 2000

We also got the gap-fill in the Nasdaq. While it’s not the route I expected at the beginning of the week, it was a possible outcome in the game plan. 

Now the question is, what does it do from here?