With over an hour to go before the opening bell on what is likely to be the single-most important day for the stock market in many months with the much-anticipated FOMC rate decision later today, I wanted to post an update on where the major stocks indices stand & what to watch for today.
/NQ (Nasdsaq 100 futures, as well as QQQ) continues to test the primary downtrend line following yesterday’s whipsaw & divergent high with any “marginal” post-FOMC rally still to be a divergent high (orange lines) although I still favor the next leg down from here. As I like to say, resistance is resistance until & unless taken out. Speaking of which, should the market rally following today’s FOMC decision (2pm EST) & follow-up press conference (2:30pm), I’ve listed the first few resistance levels above the primary downtrend line which are likely to cap any rallies. As the Nasdaq 100 futures peaked in early July right at my “preferred” 21000ish market top level, which was also the top of my market-top range, I still expect any post-FOMC rally to be capped around or below that previous July peak.
NQ 60m Sept 18th
/ES (S&P 500 futures as well as SPY) continues to test the primary downtrend line following yesterday’s whipsaw & divergent high with any “marginal” post-FOMC rally still to be a divergent high (orange lines). SPY peaked in the middle of my “market-top” zone first laid out in late June (on several instances so far) & as such, could still rally about 3% above the recent highs & continue to remain in my topping zone & still keep the negative divergences on the daily & weekly time frames intact. 60-minute chart of /ES below.
ES 60m Sept 18th
As per my video yesterday, and this is just my best guess of course, with the Federal Funds futures still pricing in a 65% chance of a 50bp cut & only a 35% chance of a 25bp cut, I think the market would react very negatively to a 25bp cut while the expected 50bp cut would probably result in an initial rally lasting hours to days (maybe well into next week), followed by a reversal within my QQQ & SPY market-top ranges & resumption of the downtrend towards my next long-term swing/trend price targets.
As I like to say, the charts are dynamic & so is my analysis so while I never read too much into the initial knee-jerk reaction following an FOMC rate decision, I will post my thoughts & an update on the stock market as soon as the dust settles later today. Personally, I think the risks to a sharp move in either (and/or both.. via whipsaws) direction is quite high & as such, my preference is to keep my positioning light today at least until after the announcement and/or Powell’s press conference.