We got the normal rollercoaster ride today but not sure things are settled out yet. The tone and intention of the FOMC
economic projections and
press conference are prone to varied interpretations, but it seems like the Committee wants to ease the market into reality as gingerly as possible. They obviously do not want any shock to market but are starting to prime the markets for higher rates and asset purchase tapering now as they see economic improvement. There was mention of impending discussions about the path of asset purchases, but the Chair said the market can expect advanced notice before taper. All of this seems geared to avoiding surprise, but it would seem likely that equity and bond markets have not fully parsed the fine details in this month's event.
On Wednesday, the
SPX closed -22.89 points lower at 4223.70 or -0.54% on a mostly negative sector profile, with financials the outlier. Market-wide internals were mildly negative. We had index weakness even before the 14:00 EDT FOMC meeting conclusion today, a drop lower during the initial release of the report and a fade of that drop during the press conference. As you can see by where the SPX caught support at the intraday low at 4202.45, the 4200 area of hedging congestion noted yesterday is not simply a round number. It is also near the 20-day moving average. The 4225/4230 area that was the first line of defense. Because of this Friday's large expiration, it's hard to conclude much about today's reaction or yet to be digested interpretations of today's FOMC event and the subtle if important changes in the dot plot and verbiage vis inflation expectations and asset tapering. Bulls want to stay above 4200 to avoid having 4150 come into play. The bounce from 4200 got the index back over that first area of congestion at 4225/4230. Traders may remain cautious here because those areas are related to quarterly expirations. The DXY and benchmark Treasury note maintained much of their post-14:00 EDT moves (DXY higher, Bonds lower/rates higher) while gold futures fell to their 50-day moving average.
And
here is an opinion piece in the NYT from yesterday. It is about the Fed's balance sheet. Nothing you don't already know but thought you might be interested when such things appear in a paper that has relatively little financial news coverage. Wishing you a good trading day.
