Tomorrow is the long-awaited FOMC meeting. The Fed is expected to cut the Fed Funds rate by 25 basis points, with the FedWatch tool assigning a 96% probability to that outcome. The S&P 500 gained about 4.3% in September so far before pausing today.
There is the possibility of a “Sell the News” selloff after the FOMC result is provided. Today we noticed that the Market Internals were becoming a bit bearish. The VIX trended higher as traders bought hedges for tomorrow’s binary event. We also noted that Breadth was paltry as Up/Down Volume was muted.
Breadth, as measured by the Advance/Decline Line (NYAD), looks overheated. The NYAD is meeting resistance at the upper Bollinger Band, while RSI has touched overbought territory and is now trending lower. This points to the possibility of a near-term pullback, which we view as a welcome buying opportunity.
Today’s sector performance leaned bearish, with Energy outperforming all other groups. Technology lagged, which is not what you want to see in a risk-on rally. It could be a one-day occurrence, but if not, it signals the potential for a pullback.
In conclusion, investors and traders should be prepared for a buyable pullback in the coming days. Tomorrow’s FOMC decision coincides with VIX expiration, both of which often spark volatility. On top of that, Friday’s triple witching options expiration is another event historically tied to sharp market swings.
In the Premium Section we’ll discuss how to use the 3 Most Important Moving Averages to manage your trades and portfolio.
Find our membership cost/benefits below. If you’re serious about Making Money (our primary goal at Cycles Edge), then the Premium Sections are key for you!
Disclaimer - All materials, information, and ideas from Cycles Edge are for educational purposes only and should not be considered Financial Advice. This blog may document actions done by the owners/writers of this blog, thus it should be assumed that positions are likely taken. If this is an issue, please discontinue reading. Cycles Edge takes no responsibility for possible losses, as markets can be volatile and unpredictable, leading to constantly changing opinions or forecasts.