(Free) Fed's Rate-Hike Is on Tap

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Our View

Everyone knew what we were watching this week. The two-day Fed meeting started yesterday and the Fed will announce its plans today (more on this Our Lean).

Aside from the Fed, we had earnings from AMD and SBUX on Tuesday and earnings from Apple — the biggest company in the market — on Thursday. On Friday, it’s the jobs report.

So when we came into Tuesday looking at it as a “sell the rallies” type of day, we did not necessarily assume the S&P would be down almost 2% before lunch.

The source? Regional banks.

The KRE ETF opened lower by just 0.30%, while the S&P 500 opened down 0.17%. Yet, at 11:30 the ETF was down more than 8%, while the SPY and ES — and I’m not exaggerating — had not registered even one green candle on the 5-minute chart.

Gold jumped back above $2,000 for the first time in weeks, rallying more than $31 an ounce, and while the odds still favor a 25 basis point increase from the Fed today, the likelihood actually dropped from 93% yesterday to 85% currently.

Our Lean

MiM and Daily Recap

The ES made a high on Globex at 4191, made a low at 4174 and opened Tuesday's session at 4176.75. After the open, the ES made a high at 4177.25 and dropped down to 4165 at 10:12, up-ticked to 4167.50 and then sold off down to 4105.50 at 11:03. From there, it rallied up to 4122, dropped down to 4110.50 at 11:53, back-and-filled for the next 30 minutes and rallied back up to 4140.75 at 1:55, 35 points off the low.

After the high, the ES sold back down to 4125.75 at 2:18, then traded up to 4144 at 3:20. It traded down to 4133 as the 3:50 imbalance showed $2.1 billion to sell and traded 4137.25 at the 4:00 close. After 4:00, the ES trickled lower and settled at 4133.25 on the 5:00 futures close, down 49 points or 1.17% on the day.

In the end, the regional banks and the debt ceiling were the main culprits of the selloff, but the Fed being on tap today didn’t help matters. In the past, more stimulus/QE would be the fix, but that’s not where the Fed is right now. Currently, there are just no easy fixes, it's a pain game and it's far from over. In terms of the ES’s overall tone, it seemed like things really ganged up on equities, but the futures then shook it off. In terms of the ES’s overall trade, volume leapt up to 1.94 million contracts traded.

Technical Edge —

• NYSE Breadth: 16% Upside Volume (!)

• Advance/Decline: 19% Advance

• VIX: ~$17.75

On Monday, we closed the remaining open positions we had and that was lucky with the timing given Tuesday's action. From here, let’s see what the market gives us ahead of the Fed.

Some stocks still trade really well, but we can afford to wait a day or two to see how things shake out from here. There are some potential market-turning catalysts on deck (mainly the Fed and AAPL), so let’s be ready to pounce when appropriate.

S&P 500 — SPY

• Upside Levels: $412.50, $414-15, $418.31, $421.25

• Downside Levels: ~$406.75 to $408, $404, $399 to $400 

S&P 500 — ES…

Guest Post

PTG/Taylor 3 Day Cycle

Author: David D Dube (a.k.a. PTGDavid)

Prior Session was Cycle Day 2 (CD2): Markets sold off aggressively during the AM Session as the Regional Banking Sector ETF ($KRE) plummeted more than 5%, sparking concerns of a possible contagion from the $FRC fallout. Markets stabilized during the PM Session settling near VWAP/Midpoint. Prior range was 72 handles on 1.777M contracts exchanged.

…Transition from Cycle Day 2 to Cycle Day 3

This leads us into Cycle Day 3 (CD3): Markets are below their Cycle Day 1 Low (4178.50) as historical odds favor recovery. The BIG Kahuna for today's trade action is the FOMC and the 2:30 Presser. It's a directional "wild-card" for today's FED play, so strap on your seatbelts and secure your chin straps. As such, scenarios to consider for today’s trading.

Bull Scenario: Price sustains a bid above 4135, initially targets 4165 – 4170 zone.

Bear Scenario: Price sustains an offer below 4135, initially targets 4105 – 4100 zone.

PVA High Edge = 4142 PVA Low Edge = 4113 Prior POC = 4133

*****The 3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.

For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:

Link to access full Cycle Spreadsheet > > Cycle Day 3 (CD3)

Thanks for reading,

PTGDavid

Interested in a FREE TRIAL to PTG Trading Room? Email Request to [email protected]

Open Positions

• Bold are the trades with recent updates.

• Italics show means the trade is closed.

• Any positions that get down to ¼ or less (AKA runners) are removed from the list below and left up to you to manage. My only suggestion would be B/E or better stops.)

• ** = previous trade setup we are stalking.

Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B

1. ** WYNN — watching for the breakout over ~$117, but not expecting it today.

Go-To Watchlist

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Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!