Talk about some ingredients for a fireworks show in markets. Not only to we have the big FOMC rate announcement scheduled for next Wednesday but before that potential powder-keg announcement, we have a slew of typically market moving economic releases due out later this week, starting the Jobless Claims, Producer Price Index, Retail Sales & the Philadelphia Fed Business Outlook Survey to be released at 8:30am ET & if that wasn't enough, Industrial Production is scheduled to be released shortly after the market opens at 9:15am ET.

Should the market make it through the day unscathed, the Consumer Price Index (CPI) is scheduled to be released an hour before the market opens on Friday not to mention the fact that Friday is a Quadruple Witching Day, days which are often marked by an increase in volatility, particularly in the last hour of trading. The bottom line is that we have a slew of economic data due out later this week, the results of which will most likely play into the Fed's decision to leave rates steady or raise them.

Essentially it boils down to this: (edit: The probability of a rate hike next week was previously incorrectly states as 85%, which is the probability that the Fed Funds Rate will remain at 50 bp next week, thereby implying a 15% chance of a rate hike). It now appears that we may have come to the point where good news (on the economy) is likely to be bad news for the stock market as that will further solidify the case for a rate hike while bad news (further deterioration of the economic fundamentals, as most economic indicators have been trending lower & are now hovering dangerously close to levels which could indicate an economic contraction), could very likely be interpreted as bad news for the stock market, as many economic indicators that have come in below expectations in recent years had room to fall as most of those indicators were either still well at expansionary readings or just dismissed as one-off aberrations as the overall trend was still healthy. That doesn't seem to be the case at this point as quite a few key economic indicators have been trending lower recently & are now hovering precariously close to levels that warn of a contraction in the economy.

With that being said, it's not the news or the numbers in the economic releases that is important, or even whether or not the Fed raises rates or decides to hold steady for now, rather it is only the stock market's reaction that matters. I'm not referring to the initial knee-jerk reaction, as the initial & often the subsequent knee-jerk reactions in the stock market immediately following an FOMC announcement is often faded, rather how the market trades in the coming days & especially weeks following the FOMC decision is what is important. Should the markets take a rate hike in stride, only to go on & move back above the recent sideways trading ranges & break out to new highs then it would simply tell us that the supply/demand dynamics are clearly bullish & vice versa should the market sell-0ff & take out the recent lows.