The Fed Will Raise Rates Today, but What About September?

Taking profits in NVDA and the Dow.

Today is Fed day.

The one thing I’ll say is, remember the ranges. We already know the 25 basis point increase will come at 2:00 pm. The real wildcard is Powell at 2:30. That’s when they — the algos — love to run the edges of the range, knock out the stops, then reverse the tape. So again…remember the ranges!

This is where some of the 0 DTE options can thrive. Once they run the edges of those ranges, the R/R setup on these options are very attractive. They’ll either go to zero and our risk is simply price paid (or the net debit) or they will scream higher on the ensuing reversal.

As for Powell, the market will be on watch for the Fed’s language regarding future rate hikes. Currently, the market is not pricing in any more rate hikes. Not just for September, but for the rest of this year.

So any language that suggests the Fed will raise again will likely give the market a reason to sell off. That said, should we really expect that?

Last month’s inflation readings all came up short of economists’ expectations, and so did the retail sales number. If the Fed could thread the needle, it would tighten credit enough to cut down inflation without killing the economy — the ole, “bend don’t break” approach.

However, that’s a tough needle to thread as the two often go hand in hand. The Fed wants to tame inflation, but they’d prefer not to sink the economy in the process. It seems likely they will pause after today, but give us a stern talking to in an effort to telegraph that they mean business.

Technical Edge 

• NYSE Breadth: 45% Upside Volume

• Advance/Decline: 49% Advance

• VIX: ~$14

The NVDA and QQQ trades were perfect pre-earnings and pre-Fed cash flow trades. We’ll trim up the rest of our Dow position today as it’s a 12-day heater and look at one more individual setup this morning.

SPY

We got the daily-up, but SPY rammed right into resistance and stopped in its tracks. 

If we zoom out just a bit, we get the 4-hour chart. 

That’s got me looking at the $453.50 to $454 area. If we see that zone, it means they ran the SPY down yesterday’s low. It’s also the 50% to 61.8% retracement range of the current rally, as well the 10-ema. 

• Upside Levels: $456 to $456.50, $459

• Downside Levels: $453.50 to $454, $451.50 to $452 + 10-day ema

S&P 500 — ES Futures

Yesterday’s layout worked well, with 4592-95 acting as resistance early in the session, then flipping to support after it cleared this area. Then it worked its way over 4600 and came within a tick of that 4609 level. 

As for today, it’s likely to be more volatile. I am keeping an eye on yesterday’s low at ~4579. 

A break of that level opens the door down to 4565, which was recent support and the 10-day moving average. An overshoot puts the ~4550s in play. 

On the upside, ~4609 is clearly resistance for the time being. 

• Upside Levels: 4592-95, 4609, 4623, 4640

• Downside levels: 4579, 4565 and the 10-day ema, 4530-25

SPX

• Upside Levels: 4578-80, 4595-4600

• Downside Levels: 4550-52, 4544, 4527.50, 4505-10

Nasdaq — NQ