Braces After a 25 bps Rate Hike

I do believe that the market is trying to turn things around, but quite frankly the question will be whether or not the economy falls right along.

• The S&P 500 sat around during the trading session on Wednesday as we waited for the Federal Reserve to come out with its interest rate decision.
• The Fed only raised rates by 25 basis points, so, therefore, some people will look at that as dovish. In fact, I’m listening to somebody on Bloomberg talk about how dovish this is right now.
• That being said, the reality is the data suggests that inflation is going to be around for much longer than people give it credit for.

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With that being said, the 4100 level will be important, and it’ll be interesting to see whether or not traders will push the market above there. If they do, then it’s possible that we see a bigger move, perhaps sending the S&P 500 to the 4200 level, followed by the 4400 level. The previous downtrend line of course comes into the picture for support, and of course, we have the 200-Day EMA underneath it could come into the picture as well. If we break down below there, it obviously opens up selling pressure, and cuts in this market down to the 3800 level before it’s all said and done.

The market is Trying to Turn Things Around

I do believe that the market is trying to turn things around, but quite frankly the question will be whether or not the economy falls right along. I don’t necessarily think it’s going to, so I believe that we are getting relatively close to a potential topping pattern. However, we will have to follow the markets in whichever direction they choose to go, which doesn’t necessarily follow reality, as we have seen more than once. You could make the argument for an ascending triangle forming, which would send the market all the way to the 4700 level, but that would need some type of catalyst to get things going.

Jerome Powell has suggested that there are more interest rate hikes coming and that they are nowhere near loosening monetary policy. It’s interesting because most of the people on Wall Street have no idea how to function in an environment that has higher rates. Every day, I hear on CNBC and Bloomberg people bloviating on how no matter what we hear, it’s all good for stocks. These are the same people that were telling you that last year. At this point, I simply watch the 200-Day EMA and the 4100 level and ignore all else.

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