The S&P 500 has rallied to a fresh, new high during trading on Monday as the trading public is trying to get ahead of the Federal Reserve announcement. While market participants have already expressed a 94.1% chance of a 25 basis point cut on Wednesday, the question then will be whether or not the statement is dovish enough to continue to have stock traders jump into the S&P 500.
We have had decent earnings during the day on Monday, but quite frankly there are still a lot of concerns out there that could push his market back and forth, so it likely that a headline could cause just as many issues as earnings at this point. The 3000 level should now offer a bit of a “floor” in the market as it was such a psychologically important level, and now I believe that any move towards that area will be barred, unless of course the Federal Reserve spooks the market by talking about a much more hawkish stance than anticipated. This of course would change everything but right now as long as the Federal Reserve is likely to go more dovish, that has people buying on the thought process of “TINA”, or “There is No Alternative.” Quite frankly, if bond yields are going to be even more anemic, it will drive investment into equities.
To the downside I would anticipate seeing the 50 day EMA nearly 2966 level also offering support if we were to somehow break down to that level. We are most certainly in a very bullish uptrend so it’s very unlikely that buyers will continue to come back into this market over time it pulls back. Quite frankly, it’s almost impossible to sort this market unless the Federal Reserve steps in and crushes expectation. However, the last time they came in and started talking about a potential hawkish move, the markets cratered roughly 10%. Jerome Powell has been taught not to do that after that tantrum, and now that we are broke into a fresh, new high you can start to talk about the ascending triangle that in a measured move could send this market as high as 3250 level above as the triangle measures roughly 200 points and is breaking out at 3050 or so. This doesn’t mean we get there right away, and it’s very likely that we will simply see a grind to the upside.