Fed More Hawkish – Sept Rate Hike Fear Will Build – Rally Getting Tired

Posted 9:30 AM ET - As expected the FOMC statement yesterday was more hawkish. The market probed for support and it immediately bounced back. This morning we are seeing some nervous jitters, but the market should be able to recover. Earnings from Apple and Facebook were excellent. After the close we will hear from Google, BIDU and Amazon. The tech sector has been leading the charge and the QQQ has broken out to a new high. If you look at SPY and DIA, they are treading water. This rally feels like it's getting tired. It will try to push higher for a few more days, but the selling pressure will start to build in August. If you have been following my advice, your overnight long positions have been scaled back considerably and you should only have a fraction of your original position on. I believe the downside risk is much greater than the upside potential at this stage. The Fed noted improving labor conditions. They also know that Brexit did not spark credit concerns. These dark clouds have parted and fear of a September rate hike will surface when the Fed is in recess. August is typically a weak month. I still like trading from the long side and I have been able to find excellent trades every day. Let the market come in this morning and start lining up stocks with relative strength. When the market finds support, get long. We should still see a few more days of decent price action. Support is at SPY $215.75. That level held after the FOMC statement yesterday and you can use it as your guide. As long as we are above it, trade from the long side. If the market breaks that support level, shift to the short side. Should this happen, we will probably drift lower the rest of the day. Given that we have Google and Amazon after the close I don't believe we will see heavy selling pressure today. The bid should remain strong and hawkish comments from the Fed yesterday were shrugged off. Look for an early probe for support this morning and a bounce. Take profits on overnight longs. . .

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