Fed Ready To Hike 75 Basis Points

September 19, 2022

The price action the next few days will be dull.

PRE-OPEN MARKET COMMENTS MONDAY – The SPY broke a key support level at $390 and we are likely to test the low of the year in the next few weeks.

Traders are bracing for a 75 basis point rate hike from the Fed this week. After a “hot” CPI and a decent jobs report, they will continue to aggressively tighten to tame inflation. That is their primary objective and they are going to attempt a “soft landing”. As a global shipping company, FedEx has its finger on the pulse of the economy and it forecasted a global recession last week.

The price action is likely to be choppy with a downward bias. Typically the volume drops off into the FOMC statement and I am expecting dull conditions. Friday was a triple witch and we had a key technical breakdown. These two events did not produce the type of brisk price movement you would expect. Consequently, we could be in for a few boring trading days.  

A likely scenario this morning is mixed overlapping candles in the first 30 minutes. This would be a sign that there are still some buyers and that the damage will be relatively contained. If  this pattern  plays out, patiently wait for bounces to enter your shorts.

A drift higher with mixed overlapping candles would be a gift this morning. We want less than half of the gap to fill. If it fills all the way (unlikely), that is a sign of decent buying pressure and you need to wait patiently before shorting. If the bounce struggles to fill the gap you will start to see compressed candles and wicks when we hit resistance. A bearish hammer or a bearish engulfing candle off of the high of the day would be a sign of resistance and that is when you want to short.

Consecutive long red candles or consecutive long green candles in the first 45 minutes would signal trend strength in that direction. Combined I would give this less than a 20% chance of happening just because of the price action Friday.

Trade from the short side and wait for your “windows”.

Support is at the low of the year and resistance is at $382 (low from Friday).

Major technical support levels have been breached.

Previous Bulletin

September 15, 2022
Top