Rate Hike Is Coming, But Then What?

What Powell says going forward will be the biggest driver.

Technical Edge — 

• NYSE Breadth: 67% Upside Volume

• Advance/Decline: 59% Advance 

• VIX: ~$25.75

Today is FOMC and we are coming into the day in a good position. On Monday, we booked 25 to 30 points in profit on the S&P futures, then hit the fade trade on Tuesday. Ultimately, I covered Tuesday’s short too early, as upside breadth was stubbornly strong and that made me think I shouldn’t overstay my welcome. 

A couple of early wins allows us quite a bit of patience to let the news play out today. At 2pm, the algos are going to go wild. Remember, they like to run the stops on both ends before finding some balance and picking a direction. 

Perhaps more than any other FOMC statement, the markets will want to hear what Powell has to say. Let’s coast into the session, not rush to do anything aggressive, stay disciplined and see what the Fed is up to. 

Powell has the power to continue the recent rally or stop it in its tracks. I’m not looking to guess which one it is ahead of the event. I’d rather react to it then try to predict it. 

S&P 500 — ES 

I like how the S&P has cooled off the last two days. We’re under a little more pressure today as the ADP number came in better than expected. 

Honestly, if the Fed says what investors want to hear, this two-day dip may give it enough ammo to push higher. If that’s the case, 3920 to 3925 is the first upside target, then 4000 to 4015. 

On the downside, I’m watching 3835, which is where the 10-day and 50-day moving averages come into play, followed by the 3800 to 3820 zone, which is prior resistance turned support. 

But at the end of the day, all of this hinges on the Fed. If they are net-net becoming less hawkish, markets have room to run. If Powell stonewalls the market, sub-3700 could be back on the table eventually.

SPY