Posted by Pete Stolcers on September 19
Posted 9:30 AM ET – The market is range bound and the action will be very quiet until the FOMC statement tomorrow. Balance sheet reduction and a rate hike in December are priced in and the news is likely to be a non-event.
The S&P 500 is holding the breakout above $248 during a seasonally weak period of the year and that is a bullish sign. Swing traders should use that level as a stop and you should be long calls as long as we are above it.
We did not get a nice swift drop to the 100-day MA to flush out bullish speculators. The reversal off of that drop would have shot the market through the all-time high and momentum would have been exceptional. That is the move I was hoping for.
Since we didn’t get the drop, the rally will be tenuous. We can expect a three steps forward, two steps backward pattern.
Earnings season was excellent and guidance was as strong as we’ve seen in years.
Economic data is consistent with moderate growth.
Credit conditions are stable and Portugal’s debt was raised to investment grade. It is the “P” in PIIGS.
Central banks are all starting to tighten and the market is comfortable with the backdrop.
Day traders should expect a very quiet day ahead of the FOMC statement. Be patient on the open and look for opportunities to get long. Use the first hour range as your guide. Set passive targets and reduce your trade count.
Analysts are expecting three rate hikes in 2018 and 2019. I don’t believe the Fed’s statement will change that forecast. Stocks will digest the news and the market will gradually start to move higher in a few days.
Stay long and use SPY $248 as your stop.
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