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(Free) No Rest for the Wicked — Fed Decision on Tap
Markets are not pricing in a rate hike today.
Danny Riley
June 14, 2023
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Our View
Yesterday we talked about Monday's rally being the front run for Tuesday’s CPI rally…and now one has to wonder if yesterday's front run was for today's no rate hike from the Fed.
According to the target rate probabilities, there is a more than 90% chance the Fed does not change rates today. However, we could get a hawkish press conference to make up for it. Further, not many investors seem to be talking about the increasing odds of a rate hike next month:
Most people now assume there will not be a rate hike today, but there remains a high probability of a July rake hike. After that, investors expect a longer pause that could last into the early part of 2024.
I am going to leave it at that…so far the only thing hellish this week is the speed of the rally.
Our Lean — Range Expansion Is In Play
This is Danny Riley’s personal trading plan for the day.
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MiM and Daily Recap
The ES traded 4388 before the CPI release, rallied up to 4415.50 and opened Tuesday's regular session at 4402.75. After the open, the ES sold off down to 4400, then rallied up to 4421.75 at 9:43, sold off down to 4396 at 10:18 and then rallied back up to 4423 at 11:24. After the high, the ES sold back off down to the VWAP at 4407 at 12:05 and then rallied back up to a new high by 1 tick at 4423.25 at 1:08 before dipping back down to 4414 at 1:16. The ES traded back up to a lower high at 4421.75 and got hit by a few big sell programs that pushed the future down to 4402.50 at 2:40.
From there, the ES rallied up to 4416.75 at 3:23, dipped down to the VWAP at 4410.25, and back-and-filled in a 4 to 5 point range until it traded 4411.75 as the 3:50 cash imbalance showed $565 million to buy and traded 4413.25 on the 4:00 cash close. After 4:00, the ES traded up to 4420.25 and traded 4418 on the 5:00 futures close, up 27 points or 0.61% on the day.
In the end, everyone always underestimates how high the PPT — the plunge protection team — can push up the S&P in light of all the economic problems. Right now the S&P is making good of the bad news. In terms of the ES's overall tone, it was firm all day. In terms of the ES’s overall trade, volume was steady at 2.48 million contracts traded (again, with the rollover in play).
Quickly from $5 billion for sale over a 5-day stretch to almost $5 billion to buy in the last 5 days.
Technical Edge
NYSE Breadth: 82% Upside Volume
Advance/Decline: 70% Advance
VIX: ~$14.50
As most long-term readers know, we tend to search for relative strength stocks to buy rather than relative weakness stocks to sell. That said, we have one open short position on the books in CVS.
Those holding that position, please see our update in the section below. Otherwise, I am glad that we are not coming into the Fed day with a full book. That always makes the trading harder for me.